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Strategic obscurity in the forecasting of disasters

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  • Aoyagi, Masaki

Abstract

A principal acquires information about a shock and then discloses it to an agent. After the disclosure, the principal and agent each decide whether to take costly preparatory actions that yield mutual benefits but only when the shock strikes. The principal maximizes his expected payoff by ex ante committing to the quality of his information, and the disclosure rule. We show that even when the acquisition of perfect information is costless, the principal may optimally acquire imperfect information when his own action eliminates the agent's incentive to take action against the risk.

Suggested Citation

  • Aoyagi, Masaki, 2014. "Strategic obscurity in the forecasting of disasters," Games and Economic Behavior, Elsevier, vol. 87(C), pages 485-496.
  • Handle: RePEc:eee:gamebe:v:87:y:2014:i:c:p:485-496
    DOI: 10.1016/j.geb.2014.07.001
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    More about this item

    Keywords

    Endogenous information; Disclosure; Signal quality; Transparency; Specific investment; Strategic ignorance;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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