Optimal disclosure policy and undue diligence
Information about asset quality is often not disclosed to asset markets. What principles determine when a financial regulator should disclose or withhold information? We explore this question using a risk-sharing model with intertemporal trade and limited commitment. Information about future asset returns is available to society, but legislation dictates whether this information is disclosed or not. In our environment, nondisclosure is generally desirable except when individuals can access hidden information – what we call undue diligence – at sufficiently low cost. Ironically, information disclosure is desirable only when individuals have a strong incentive to discover it for themselves.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrea Prat, 2002.
"The Wrong Kind of Transparency,"
STICERD - Theoretical Economics Paper Series
439, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Andrea Prat, 2004. "The wrong kind of transparency," LSE Research Online Documents on Economics 24712, London School of Economics and Political Science, LSE Library.
- Andrea Prat, 2002. "The wrong kind of transparency," LSE Research Online Documents on Economics 3679, London School of Economics and Political Science, LSE Library.
- Prat, Andrea, 2003. "The Wrong Kind of Transparency," CEPR Discussion Papers 3859, C.E.P.R. Discussion Papers.
- Gary B. Gorton, 2008.
"The Subprime Panic,"
NBER Working Papers
14398, National Bureau of Economic Research, Inc.
- Lagos, Ricardo & Rocheteau, Guillaume, 2008.
"Money and capital as competing media of exchange,"
Journal of Economic Theory,
Elsevier, vol. 142(1), pages 247-258, September.
- Citanna, Alessandro & Villanacci, Antonio, 2000.
"Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices,"
Journal of Economic Theory,
Elsevier, vol. 90(2), pages 222-253, February.
- Alessandro Citanna & Antonio Villanacci, . "Incomplete markets, allocative efficiency and the information revealed by prices," GSIA Working Papers 10, Carnegie Mellon University, Tepper School of Business.
- Federal Reserve Bank of St. Louis & David Andolfatto, 2010.
"On the Social Cost of Transparency in Monetary Economies,"
2010 Meeting Papers
980, Society for Economic Dynamics.
- David Andolfatto, 2010. "On the social cost of transparency in monetary economies," Working Papers 2010-001, Federal Reserve Bank of St. Louis.
- Makoto Watanabe & Leo Ferraris, 2007.
"Collateral Secured Loans in a Monetary Economy,"
2007 Meeting Papers
121, Society for Economic Dynamics.
- Aleksander Berentsen & Guillaume Rocheteau, 2004.
"Money and Information,"
Review of Economic Studies,
Wiley Blackwell, vol. 71(4), pages 915-944, October.
When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:149:y:2014:i:c:p:128-152. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.