Acquisition and Disclosure of Information Prior to Sale

Steven Shavell ()

RAND Journal of Economics, 1994, vol. 25, issue 1, 20-36

Abstract: This article analyzes incentives to acquire information about the value of things before sales transactions, and voluntary versus required disclosure of such information. Two distinctions are emphasized: whether information is mere foreknowledge or instead can raise value -- has social value; and whether it is sellers or buyers who decide to acquire information. The main conclusions in the model are that voluntary disclosure results in socially excessive incentives to acquire information; mandatory disclosure is socially desirable for sellers; but for buyers, the freedom to keep silent may be needed to spur acquisition of socially desirable information.

Date: 1994
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