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Hidden Testing and Selective Disclosure of Evidence

Author

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  • Claudia Herresthal

Abstract

An agent can sequentially run informative tests about an unknown state and disclose (some or all) outcomes to a decision maker who then faces an approval choice. Players agree on the optimal choice under certainty, but the decision maker has a higher approval threshold than the agent. I compare the case where testing is hidden and the agent chooses which test outcomes to verifiably disclose to the case where testing is observable. When testing is observable, I show that the agent may strategically stop testing even if further tests could yield a mutual benefit. I find conditions under which the decision maker is strictly better off under hidden testing and in some equilibria both players are strictly better off under hidden testing than in the unique equilibrium under observable testing.

Suggested Citation

  • Claudia Herresthal, 2020. "Hidden Testing and Selective Disclosure of Evidence," CRC TR 224 Discussion Paper Series crctr224_2020_145v1, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2020_145v1
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp145
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    Cited by:

    1. Jacopo Bizzotto & Eduardo Perez-Richet & Adrien Vigier, 2020. "Communication via Third Parties," Working Papers 202006, Oslo Metropolitan University, Oslo Business School.

    More about this item

    Keywords

    endogenous information acquisition; verifiable disclosure; transparency; questionable research practices;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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