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Developing a Reputation for Reticence

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  • Michael D. Grubb

Abstract

A sender who has disclosable information with probability less than one may partially conceal bad news by choosing to withhold information and pooling with uninformed types. The success of this strategy depends on receivers' beliefs about the probability that the sender has disclosable news. In a dynamic context, informed senders try to cultivate a reputation for reticence either by concealing good news along with the bad, or by concealing some good news and disclosing some bad news. A reputation for reticence is valuable because it makes receivers less skeptical of past or future nondisclosures. The model provides insight into the choice by firms such as Google not to disclose quarterly earnings guidance to analysts, as well as Tony Blair's reticence over his son's vaccine record during the measles–mumps–rubella scare in the United Kingdom.

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  • Michael D. Grubb, 2011. "Developing a Reputation for Reticence," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 225-268, March.
    • Handle: RePEc:bla:jemstr:v:20:y:2011:i:1:p:225-268
    DOI: 10.1111/j.1530-9134.2010.00288.x
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    Cited by:

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    2. Montero, Maria & Sheth, Jesal D., 2021. "Naivety about hidden information: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 92-116.
    3. Ispano, Alessandro, 2018. "Information acquisition and the value of bad news," Games and Economic Behavior, Elsevier, vol. 110(C), pages 165-173.
    4. Bertomeu, Jeremy & Marinovic, Iván & Terry, Stephen J. & Varas, Felipe, 2022. "The dynamics of concealment," Journal of Financial Economics, Elsevier, vol. 143(1), pages 227-246.
    5. Dziuda, Wioletta, 2011. "Strategic argumentation," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1362-1397, July.
    6. Creane, Anthony & Jeitschko, Thomas D. & Sim, Kyoungbo, 2022. "Welfare effects of product certification under latent adverse selection," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    7. Harbaugh, Richmond & To, Theodore, 2020. "False modesty: When disclosing good news looks bad," Journal of Mathematical Economics, Elsevier, vol. 87(C), pages 43-55.

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