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False Modesty: When Disclosing Good News Looks Bad

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Author Info
Rick Harbaugh (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
Theodore To (Bureau of Labor Statistics)

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Abstract

Is it always wise to disclose good news? We find that the worst sender with good news has the most incentive to disclose it, so reporting good news can paradoxically make the sender look bad. If the good news is attainable by sufficiently mediocre types, or if the sender is already expected to be of a relatively high type, withholding good news is an equilibrium. Since the sender has a legitimate fear of looking too anxious to reveal good news, having a third party disclose the news, or mandating that the sender disclose the news, can help the sender. The predictions are tested by examining when economics faculty at different institutions use titles such as "Dr" and "Professor" in voicemail greetings and course syllabi.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2005-05-harbaugh-to.pdf
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Publisher Info
Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2005-05.

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Date of creation: 2005
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Handle: RePEc:iuk:wpaper:2005-05

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Related research
Keywords: disclosure; persuasion; communication; verifiable message; countersignaling; private receiver information;

Find related papers by JEL classification:
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

Cited by:
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  1. Rick Harbaugh & John W. Maxwell & Beatrice Roussillon, 2006. "The Groucho Effect of Uncertain Standards," Working Papers 2006-09, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
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This page was last updated on 2009-11-16.

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