Disclosure to a Credulous Audience: The Role of Limited Attention

David Hirshleifer, Sonya Lim () and Siew Hong Teoh

MPRA Paper from University Library of Munich, Germany

Abstract: In our model, informed players decide whether or not to disclose, and observers allocate attention among disclosed signals, and toward reasoning through the implications of a failure to disclose. In equilibrium disclosure is incomplete, and observers are unrealistically optimistic. Nevertheless, regulation requiring greater disclosure can reduce observers' belief accuracies and welfare. A stronger tendency to neglect disclosed signals increases disclosure, whereas a stronger tendency to neglect failures to disclose reduces disclosure. Observer beliefs are influenced by the salience of disclosed signals, and disclosure in one arena can crowd out disclosure in other fundamentally unrelated arenas.

Keywords: disclosure; disclosure regulation; limited attention; credulity (search for similar items in EconPapers)
JEL-codes: D83 D84 G18 M49 (search for similar items in EconPapers)
Date: 2004-10-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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