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Strategic Disclosure of Valuable Information within Competitive Environments

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Author Info
Young-Ro Yoon () (Indiana University Bloomington)

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Abstract

Can valuable information be disclosed intentionally by the informed agent even within a competitive environment? In this article, we bring our interest into the asymmetry in reward and penalty in the payoff structure and explore its effects on the strategic disclosure of valuable information. According to our results, the asymmetry in reward and penalty is a necessary condition for the disclosure of valuable information. This asymmetry also decides which quality of information is revealed for which incentive; if the penalty is larger than the reward or the reward is weakly larger than the penalty, there exists an equilibrium in which only a low quality type of information is revealed, in order to induce imitation. On the other hand, if the reward is sufficiently larger than the penalty, there exist equilibria in which either all types or only high quality type of information is revealed, in order to induce deviation. The evaluation of the equilibrium in terms of expected payoff yields that the equilibrium where valuable information is disclosed strategically dominates the equilibrium where it is concealed.

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Publisher Info
Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2008-022.

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Length: 34 pages
Date of creation: Aug 2008
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Handle: RePEc:inu:caeprp:2008-022

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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References listed on IDEAS
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  1. Effinger, Matthias R. & Polborn, Mattias K., 2001. "Herding and anti-herding: A model of reputational differentiation," European Economic Review, Elsevier, vol. 45(3), pages 385-403, March. [Downloadable!] (restricted)
  2. Creane, Anthony, 1998. "Risk and Revelation: Changing the Value of Information," Economica, London School of Economics and Political Science, vol. 65(258), pages 247-61, May. [Downloadable!] (restricted)
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  3. Gul, Faruk & Lundholm, Russell, 1995. "Endogenous Timing and the Clustering of Agents' Decisions," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1039-66, October. [Downloadable!] (restricted)
  4. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October. [Downloadable!] (restricted)
  5. Fried, Dov, 1984. "Incentives for Information Production and Disclosure in a Duopolistic Environment," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 367-81, May. [Downloadable!] (restricted)
  6. De Fraja, Giovanni, 1993. "Strategic spillovers in patent races," International Journal of Industrial Organization, Elsevier, vol. 11(1), pages 139-146, March. [Downloadable!] (restricted)
  7. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March. [Downloadable!] (restricted)
  8. Avery, Christopher N. & Chevalier, Judith A., 1999. "Herding over the career," Economics Letters, Elsevier, vol. 63(3), pages 327-333, June. [Downloadable!] (restricted)
  9. Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 383-394, Autumn. [Downloadable!] (restricted)
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