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The Wrong Kind of Transparency

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Author Info
Andrea Prat

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Abstract

In a model of career concerns for experts, when is the principal hurt from observing more information about her agent? This paper introduces a distinction between information on the consequence of the agent's action and information directly on the agent's action. It is the latter kind that can hurt the principal by engendering conformism, which worsens both discipline and sorting. The paper identifies a necessary and sufficient condition on the agent signal structure under which transparency on action is detrimental to the principal. The paper also shows the existence of complementarities between transparency on action and transparency on consequence. The results are used to interpret existing disclosure policies in politics, corporate governance, and delegated portfolio management.

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 439.

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Date of creation: Oct 2002
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Handle: RePEc:cep:stitep:439

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Related research
Keywords: Transparency; career concerns; expert agents.;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  5. Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  6. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA. [Downloadable!]
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  7. Robert E. Verrecchia & Christian Leuz, 1999. "The Economic Consequences of Increased Disclosure," Working Paper Series: Finance and Accounting 41, Department of Finance, Goethe University Frankfurt am Main. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Repullo, Rafael, 2005. "Liquidity, Risk-Taking and the Lender of Last Resort," CEPR Discussion Papers 4967, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Ellen E. Meade & David Stasavage, 2004. "Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve," CEP Discussion Papers dp0608, Centre for Economic Performance, LSE. [Downloadable!]
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  3. James E. Alt & David Dreyer Lassen & Shanna Rose, 2006. "The Causes of Fiscal Transparency: Evidence from the American States," EPRU Working Paper Series 06-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  4. Andrea Mattozzi & Antonio Merlo, 2005. "Political Careers or Career Politicians?," PIER Working Paper Archive 05-032, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Dec 2005. [Downloadable!]
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  5. Rafael Repullo, 2004. "Policies For Banking Crises: A Theoretical Framework," Working Papers wp2004_0418, CEMFI. [Downloadable!]
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  6. Eric Le Borgne & Gauti B. Eggertsson, 2007. "Dynamic Incentives and the Optimal Delegation of Political Power," IMF Working Papers 07/91, International Monetary Fund. [Downloadable!]
  7. David Hugh-Jones & David Reinstein, 2009. "Secret Santa: Anonymity, Signalling, and Conditional Cooperation," Economics Discussion Papers 670, University of Essex, Department of Economics. [Downloadable!]
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  8. Gersbach, Hans & Hahn, Volker, 2008. "Information Acquisition and Transparency in Committees," CEPR Discussion Papers 6677, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Alexander K. Koch & Albrecht Morgenstern, 2005. "From Team Spirit to Jealousy: The Pitfalls of Too Much Transparency," IZA Discussion Papers 1661, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Gilat Levy, 2007. "Decision Making in Committees: Transparency, Reputation, and Voting Rules," American Economic Review, American Economic Association, vol. 97(1), pages 150-168, March. [Downloadable!]
  11. Otto H. Swank & Bauke Visser, 2007. "Is Transparency to no avail? Committee Decision-making, Pre-meetings, and Credible Deals," Tinbergen Institute Discussion Papers 07-055/1, Tinbergen Institute. [Downloadable!]
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  12. Justin Fox, 2007. "Government transparency and policymaking," Public Choice, Springer, vol. 131(1), pages 23-44, April. [Downloadable!] (restricted)
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