Strategic obscurity in the forecasting of disasters

Masaki Aoyagi

Games and Economic Behavior, 2014, vol. 87, issue C, 485-496

Abstract: A principal acquires information about a shock and then discloses it to an agent. After the disclosure, the principal and agent each decide whether to take costly preparatory actions that yield mutual benefits but only when the shock strikes. The principal maximizes his expected payoff by ex ante committing to the quality of his information, and the disclosure rule. We show that even when the acquisition of perfect information is costless, the principal may optimally acquire imperfect information when his own action eliminates the agent's incentive to take action against the risk.

Keywords: Endogenous information; Disclosure; Signal quality; Transparency; Specific investment; Strategic ignorance (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:87:y:2014:i:c:p:485-496

DOI: 10.1016/j.geb.2014.07.001

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