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Costly Voluntary Disclosure in a Signaling Game

Author

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  • Pecorino Paul

    (Department of Economics, Finance and Legal Studies, University of Alabama, Box 870224, Tuscaloosa, AL35487, USA)

  • Van Boening Mark

    (Department of Economics, University of Mississippi, Holman Hall 373, University, MS38677, USA)

Abstract

We conduct an experimental analysis of pretrial bargaining, while allowing for the costly disclosure of private information in a signaling game. Under the theory, 100 % of plaintiffs with a weak case are predicted to remain silent, while 100 % of the plaintiffs with a strong case are predicted to voluntarily disclose their type. We find that 75 % of weak plaintiffs remain silent and 67 % of strong plaintiffs reveal their type. In line with theory, weak plaintiffs who reveal their type receive a lower payoff, while strong plaintiffs who reveal their type receive a higher payoff. Plaintiffs with a strong case who reveal their type have a dispute rate which is 50 % points lower than strong plaintiffs who remain silent. Because plaintiffs who reveal their type cannot extract the entire surplus from settlement from the defendant, the incentive to engage in voluntary disclosure is weaker empirically than it is in theory.

Suggested Citation

  • Pecorino Paul & Van Boening Mark, 2019. "Costly Voluntary Disclosure in a Signaling Game," Review of Law & Economics, De Gruyter, vol. 15(2), pages 1-32, July.
    • Handle: RePEc:bpj:rlecon:v:15:y:2019:i:2:p:32:n:4
    DOI: 10.1515/rle-2016-0074
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    References listed on IDEAS

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    1. Farmer, Amy & Pecorino, Paul, 2004. "Pretrial settlement with fairness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 287-296, July.
    2. repec:wly:soecon:v:82:4:y:2016:p:1046-1058 is not listed on IDEAS
    3. Paul Pecorino & Mark Van Boening, 2010. "Fairness in an Embedded Ultimatum Game," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 263-287, May.
    4. Claudia M. Landeo, 2018. "Law and economics and tort litigation institutions: theory and experiments," Chapters, in: Joshua C. Teitelbaum & Kathryn Zeiler (ed.), Research Handbook on Behavioral Law and Economics, chapter 9, pages 247-268, Edward Elgar Publishing.
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    7. Jeitschko, Thomas D. & Normann, Hans-Theo, 2012. "Signaling in deterministic and stochastic settings," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 39-55.
    8. Pecorino Paul & Van Boening Mark, 2014. "Bargaining with Asymmetric Dispute Costs," Review of Law & Economics, De Gruyter, vol. 10(1), pages 1-28, March.
    9. Babcock, Linda & Landeo, Claudia M., 2004. "Settlement escrows: an experimental study of a bilateral bargaining game," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 401-417, March.
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    13. Kawagoe, Toshiji & Takizawa, Hirokazu, 2009. "Equilibrium refinement vs. level-k analysis: An experimental study of cheap-talk games with private information," Games and Economic Behavior, Elsevier, vol. 66(1), pages 238-255, May.
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    Cited by:

    1. Farmer, Amy & Pecorino, Paul, 2020. "Disclosure and Discovery with fairness," International Review of Law and Economics, Elsevier, vol. 62(C).
    2. Pecorino, Paul & Solomon, Michael & Van Boening, Mark, 2021. "Bargaining with voluntary transmission of private information: An experimental analysis of final offer arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 334-366.

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