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Disclosure: Psychology Changes Everything


  • George Loewenstein

    () (Department of Social and Decision Sciences, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Cass R. Sunstein

    (Harvard Law School, Harvard University, Cambridge, Massachusetts 02138)

  • Russell Golman

    (Department of Social and Decision Sciences, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)


We review literature examining the effects of laws and regulations that require public disclosure of information. These requirements are most sensibly imposed in situations characterized by misaligned incentives and asymmetric information between, for example, a buyer and seller or an advisor and advisee. We review the economic literature relevant to such disclosure and then discuss how different psychological factors complicate, and in some cases radically change, the economic predictions. For example, limited attention, motivated attention, and biased assessments of probability on the part of information recipients can significantly diminish, or even reverse, the intended effects of disclosure requirements. In many cases, disclosure does not much affect the recipients of the information but does significantly affect the behavior of the providers, sometimes for the better and sometimes for the worse. We review research suggesting that simplified disclosure, standardized disclosure, vivid disclosure, and social comparison information can all be used to enhance the effectiveness of disclosure policies.

Suggested Citation

  • George Loewenstein & Cass R. Sunstein & Russell Golman, 2014. "Disclosure: Psychology Changes Everything," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 391-419, August.
  • Handle: RePEc:anr:reveco:v:6:y:2014:p:391-419

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    Cited by:

    1. Tode, Christian, 2016. "Offering Energy Efficiency under Imperfect Competition and Consumer Inattention," EWI Working Papers 2016-6, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    2. Lucia Reisch & Cass Sunstein, 2014. "Redesigning Cockpits," Journal of Consumer Policy, Springer, vol. 37(3), pages 333-339, September.
    3. Tobias Gesche, 2016. "De-biasing strategic communication," ECON - Working Papers 216, Department of Economics - University of Zurich, revised Jul 2017.
    4. Sebastián Araya & Andrés Elberg & Carlos Noton & Daniel Schwartz, 2018. "Identifying Food Labeling Effects on Consumer Behavior," Documentos de Trabajo 338, Centro de Economía Aplicada, Universidad de Chile.
    5. Lindsay C. Page & Judith Scott-Clayton, 2015. "Improving College Access in the United States: Barriers and Policy Responses," NBER Working Papers 21781, National Bureau of Economic Research, Inc.
    6. Adrian Hillenbrand & André Schmelzer, 2015. "Beyond Information: Disclosure, Distracted Attention, and Investor Behavior," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2015_20, Max Planck Institute for Research on Collective Goods.
    7. Page, Lindsay C. & Scott-Clayton, Judith, 2016. "Improving college access in the United States: Barriers and policy responses," Economics of Education Review, Elsevier, vol. 51(C), pages 4-22.
    8. Bruce Carlin & Arna Olafsson & Michaela Pagel, 2017. "FinTech Adoption Across Generations: Financial Fitness in the Information Age," NBER Working Papers 23798, National Bureau of Economic Research, Inc.
    9. Gine, Xavier & Martinez Cuellar, Cristina & Mazer, Rafael Keenan, 2014. "Financial (dis-)information : evidence from an audit study in Mexico," Policy Research Working Paper Series 6902, The World Bank.
    10. repec:eee:jbvent:v:33:y:2018:i:4:p:470-492 is not listed on IDEAS
    11. Blum, Bianca & Hübner, Julian & Berger, Harald & Neumärker, Karl Justus Bernhard, 2018. "Libertarian paternalistic instruments fostering sustainable energy consumption: An analysis based on energy-efficient LED technology," The Constitutional Economics Network Working Papers 03-2018, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
    12. Fox, Jonathan A., 2015. "Social Accountability: What Does the Evidence Really Say?," World Development, Elsevier, vol. 72(C), pages 346-361.

    More about this item


    mandatory disclosure; regulation; behavioral economics; nudges; telltale heart effect; moral licensing;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation


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