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Costly voluntary disclosure in a screening game

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  • Pecorino, Paul
  • Van Boening, Mark

Abstract

We conduct an experimental analysis of pretrial bargaining, while allowing for the costly voluntary disclosure of private information in a screening game. In this game, the theoretical prediction is that costly voluntary disclosures will not occur. This hinges on the prediction that the person making the offer will extract all the joint surplus of settlement from the player making the costly disclosure. If fairness considerations prevent this from occurring, then we may observe costly disclosures when none are predicted to occur. Our chief finding is that plaintiffs with a strong case reveal their private information 42% of the time, when the theoretical prediction is that they should do so 0% of the time. Fairness considerations appear to be important in explaining the deviation from theory. For a plaintiff with a strong case, the return to revealing private information is approximately zero, while theory predicts that this return should be negative.

Suggested Citation

  • Pecorino, Paul & Van Boening, Mark, 2015. "Costly voluntary disclosure in a screening game," International Review of Law and Economics, Elsevier, vol. 44(C), pages 16-28.
  • Handle: RePEc:eee:irlaec:v:44:y:2015:i:c:p:16-28
    DOI: 10.1016/j.irle.2015.08.002
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    References listed on IDEAS

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    Keywords

    Experimental bargaining; Asymmetric information; Costly voluntary disclosure; Civil litigation; Fairness;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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