Strategic disclosure with reputational concerns

Wenhao Zhang

Journal of Mathematical Economics, 2024, vol. 111, issue C

Abstract: I study a strategic disclosure model wherein an uninformed decision-maker (DM) consults an expert of uncertain types regarding the state before acting. The expert may be an honest type, who is committed to reporting the truth; or a strategic type, whose payoff increases in the DM’s action independent of the state and, thus, strategically discloses information to facilitate his agenda while also valuing a reputation for honesty. We find that if the expert fails to obtain information with positive probability, a monotone equilibrium exists that involves an interval wherein the strategic expert adopts a mixed strategy for disclosure, in contrast to a simple cutoff rule that cannot be sustained in equilibrium. The value that the strategic expert attaches to reputation serves as a commitment device to promote disclosure, as does the higher probability that the state is observed, whereas an honest expert’s greater presence may harm the strategic expert’s disclosure incentive.

Keywords: Disclosure; Strategic communication; Reputation; Mixed strategy (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:111:y:2024:i:c:s0304406824000077

DOI: 10.1016/j.jmateco.2024.102945

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