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Forced Information Disclosure and the Fallacy of Transparency in Markets

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  • Timothy N. Cason
  • Charles R. Plott

Abstract

A theory advanced in regulatory hearings holds that market performance will be improved if one side of the market is forced to publicly reveal preferences. For example, wholesale electricity producers claim that retail electricity consumers would pay lower prices if wholesale public utility demand is disclosed to producers. Experimental markets studied here featured decentralized, privately negotiated contracts, typical of the wholesale electricity markets. Two conclusions emerge: (1) such markets generally converge to the competitive equilibrium and (2) forced disclosure works to the disadvantage of the disclosing side. Information disclosure would result in higher wholesale and thus higher retail electricity prices. (JEL L50, L94, D43) Copyright 2005, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ei/cbi049
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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 43 (2005)
Issue (Month): 4 (October)
Pages: 699-714

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Handle: RePEc:oup:ecinqu:v:43:y:2005:i:4:p:699-714

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Cited by:
  1. Bart Wilson & Arthur Zillante, 2010. "More Information, More Ripoffs: Experiments with Public and Private Information in Markets with Asymmetric Information," Review of Industrial Organization, Springer, vol. 36(1), pages 1-16, February.
  2. Rietz, Thomas & Sheremeta, Roman & Shields, Timothy & Smith, Vernon, 2013. "Transparency, Efficiency and the Distribution of Economic Welfare in Pass-Through Investment Trust Games," MPRA Paper 53594, University Library of Munich, Germany.

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