 An experimental investigation of reputation effects of disclosure in an investment/trust gameJournal of Economic Behavior & Organization, 2013, vol. 94, issue C, 130-144 Abstract: This paper examines experimentally the reputation building role of disclosure in an investment/trust game. It provides experimental evidence in support of sequential equilibrium behavior in a finitely repeated investment/trust game where information asymmetry raises the possibility of voluntary disclosure. I define two regimes, namely disclosure regime and no-disclosure regime and it is only in the disclosure regime that such disclosure of private information is a possibility. I compare investment levels across two regimes and find the startling result that investment is lower in disclosure regime. I find that this lower investment is attributable to the fact that the prior probability with which an investor in the disclosure regime believes that a manager is trustworthy is significantly lower than the prior probability with which an investor in the no-disclosure regime believes that a manager is trustworthy. I introduce a two-stage experimental design to homogenize prior beliefs about managers’ trustworthiness and find that after such homogenization, investment is higher in disclosure. Keywords: Disclosure; Reputation; Investment; Trust (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:94:y:2013:i:c:p:130-144 DOI: 10.1016/j.jebo.2013.07.018 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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