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Disclosure to an Audience with Limited Attention

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Author Info

  • David Hirshleifer

    (Fisher College of Business, Ohio State University)

  • SONYA SEONGYEON LIM

    (DePaul University)

  • Siew Hong Teoh

    (Fisher College of Business, Ohio State University)

Abstract

In our model, informed players decide whether or not to disclose, and observers allocate attention among disclosed signals, and toward reasoning through the implications of a failure to disclose. In equilibrium disclosure is incomplete, and observers are unrealistically optimistic. Nevertheless, regulation requiring greater disclosure can reduce observers' belief accuracies and welfare. A stronger tendency to neglect disclosed signals increases disclosure, whereas a stronger tendency to neglect failures to disclose reduces disclosure. Observer beliefs are influenced by the salience of disclosed signals, and disclosure in one arena can crowd out disclosure in other fundamentally unrelated arenas.

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File URL: http://128.118.178.162/eps/game/papers/0412/0412002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 0412002.

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Length: 49 pages
Date of creation: 04 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpga:0412002

Note: Type of Document - pdf; pages: 49. PDF
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Web page: http://128.118.178.162

Related research

Keywords: Disclosure policy; disclosure regulation; limited attention; behavioral economics; behavioral accounting; behavioral finance; market efficiency; psychology and economics;

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References

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  1. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
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  4. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
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  12. Xavier Gabaix & David Laibson, 2002. "The 6D Bias and the Equity Premium Puzzle," Harvard Institute of Economic Research Working Papers 1947, Harvard - Institute of Economic Research.
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  14. Gabaix, Xavier & Laibson, David Isaac & Moloche, Guillermo & Stephen, Weinberg, 2003. "The allocation of attention: theory and evidence," MPRA Paper 47339, University Library of Munich, Germany.
  15. Stefano DellaVigna & Joshua M. Pollet, 2005. "Attention, Demographics, and the Stock Market," NBER Working Papers 11211, National Bureau of Economic Research, Inc.
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  17. Radner, Roy & Rothschild, Michael, 1975. "On the allocation of effort," Journal of Economic Theory, Elsevier, vol. 10(3), pages 358-376, June.
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Citations

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Cited by:
  1. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2005. "Information Acquisition: Experimental Analysis of a Boundedly Rational Model," Levine's Bibliography 666156000000000480, UCLA Department of Economics.
  2. Vincze, János, 2010. "Miért és mitől védjük a fogyasztókat?. Aszimmetrikus információ és/vagy korlátozott racionalitás
    [Asymmetric information and/or bounded rationality: why are consumers protected and from
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 725-752.
  3. Stefano DellaVigna & Joshua M. Pollet, 2009. "Capital Budgeting vs. Market Timing: An Evaluation Using Demographics," NBER Working Papers 15184, National Bureau of Economic Research, Inc.
  4. Hirshleifer, David & Teoh, Siew Hong, 2005. "Limited Investor Attention and Stock Market Misreactions to Accounting Information," Working Paper Series 2005-24, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  5. Hirshleifer, David & Lim, Sonya Seongyeon & Teoh, Siew Hong, 2006. "Driven to distraction: Extraneous events and underreaction to earnings news," MPRA Paper 3110, University Library of Munich, Germany, revised 16 Apr 2007.
  6. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9142, University Library of Munich, Germany.
  7. Mark Bagnoli & Stanley Levine & Susan G. Watts, 2005. "Analyst estimation revision clusters and corporate events, Part II," Annals of Finance, Springer, vol. 1(4), pages 379-393, October.
  8. Florian Hoffmann & Roman Inderst & Marco Ottaviani, 2013. "Hypertargeting, Limited Attention, and Privacy: Implications for Marketing and Campaigning," Working Papers 479, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. Stefano DellaVigna & Joshua M. Pollet, 2007. "Demographics and Industry Returns," American Economic Review, American Economic Association, vol. 97(5), pages 1667-1702, December.
  10. Dong Lou, 2013. "Attracting investor attention through advertising," LSE Research Online Documents on Economics 54382, London School of Economics and Political Science, LSE Library.
  11. Stefano DellaVigna & Joshua M. Pollet, 2005. "Attention, Demographics, and the Stock Market," NBER Working Papers 11211, National Bureau of Economic Research, Inc.

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