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The Wrong Kind of Transparency

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Author Info
Prat, Andrea

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Abstract

In a model of career concerns for experts, when is a principal hurt from observing more information about their agent? This Paper introduces a distinction between information on the consequence of the agent's action and information directly on the agent's action. When the latter kind of information is available, the agent faces an incentive to disregard useful private signals and act according to how an able agent is expected to act a priori. This conformist behaviour hurts the principal in two ways: the decision made by the agent is less likely to be the right one (discipline) and ex post it is more difficult to evaluate the agent's ability (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 on the distinction between transparency on action and transparency on consequence are then used to interpret existing disclosure policies in politics, corporate governance, and delegated portfolio management.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3859.

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Date of creation: Apr 2003
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Handle: RePEc:cpr:ceprdp:3859

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Related research
Keywords: disclosure; expert agents; transparency;

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

References listed on IDEAS
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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!]
    Other versions:
  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!]
    Other versions:
  5. Rafael Repullo, 2004. "Policies For Banking Crises: A Theoretical Framework," Working Papers wp2004_0418, CEMFI. [Downloadable!]
    Other versions:
  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!]
    Other versions:
  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!]
    Other versions:
  12. Justin Fox, 2007. "Government transparency and policymaking," Public Choice, Springer, vol. 131(1), pages 23-44, April. [Downloadable!] (restricted)
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