Disclosure under Unawareness: An Experiment

Ying Xue Li and Burkhard Schipper

No 370, Working Papers from University of California, Davis, Department of Economics

Abstract: We consider a disclosure game between a seller and a buyer. The seller knows the quality of a good, while the buyer does not. Before the buyer decides how many units to purchase, the seller can disclose verifiable information about the good. The better the information, the more the buyer is inclined to buy. The information about the good is two-dimensional. We design two experimental treatments: In the unawareness treatment, the buyer is uncertain about the first dimension, but unaware of the second. Here, unawareness refers to a lack of conception rather than lack of information. In the control treatment, the buyer is aware of both dimensions, but uncertain about them. The theory predicts unraveling of information in the control treatment but not in the unawareness treatment. Our experimental findings are consistent with this prediction. However, a closer examination reveals that this outcome is driven by buyers becoming confused when sellers naively raise awareness of the second dimension.

Keywords: disclosure of information; disclosure games; verifiable information; unawareness; unknown unknowns; unraveling; rationalizability; experimental games (search for similar items in EconPapers)
JEL-codes: C72 C92 D83 (search for similar items in EconPapers)
Pages: 21
Date: 2025-03-31
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