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Disclosure of Information in Regulatory Proceedings

  • Lewis, Tracy R
  • Poitevin, Michel

This paper examines how different rules for presentation of evidence affect verdicts in regulatory hearings and the welfare and efficiency properties these procedures exhibit. The hearing is modeled as a game of imperfect information in which the respondent is privately informed about validity of his case. The respondent may present evidence to support his case. The commission observes whether the respondent presents evidence, and the nature of the evidence presented to update its beliefs about the validity of the case. Based on these beliefs and the standard of proof for conviction, the commission decides whether the respondent's application should be accepted or rejected. The sequential equilibria of this game are examined for their implications regarding (i) the desirability of making disclosure of evidence mandatory rather than voluntary, (ii) the burden of proof undertaken by the respondent to prove his case, and (iii) the impact of information accuracy and disclosure costs on the outcome of the hearing and the welfare of the respondents. Ce papier étudie comment différentes règles pour la production de preuves peuvent influencer la prise de décision d'une agence de réglementation ainsi que les propriétés de bien-être de ces règles. Une firme réglementée possède une information privée quant à la validité de sa requête et peut produire des éléments de preuve pour la soutenir. Une agence de réglementation observe la preuve présentée par la firme et se forme alors une opinion sur la validité de la requête. Les équilibres de ce jeu sont caractérisés et les points suivants sont étudiés : (i) la production de certains éléments doit-elle être obligatoire ou volontaire ? (ii) quelles sont les conséquences du fardeau de la preuve que la firme doit supporter ? (iii) quel est l'impact de la précision de la preuve et des coûts associés à sa produciton sur la décision de l'agence et le bien-être de la firme ?

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Article provided by Oxford University Press in its journal Journal of Law, Economics and Organization.

Volume (Year): 13 (1997)
Issue (Month): 1 (April)
Pages: 50-73

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Handle: RePEc:oup:jleorg:v:13:y:1997:i:1:p:50-73
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  1. Salant, Stephen W., 1984. "Litigation of Settlement Demands Questioned by Bayesian Defendants," Working Papers 516, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Grossman, Gene M & Katz, Michael L, 1983. "Plea Bargaining and Social Welfare," American Economic Review, American Economic Association, vol. 73(4), pages 749-57, September.
  3. Fishman, Michael J & Hagerty, Kathleen M, 1990. "The Optimal Amount of Discretion to Allow in Disclosure," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 427-44, May.
  4. Daniel L. Rubinfeld & David E.M. Sappington, 1987. "Efficient Awards and Standards of Proof in Judicial Proceedings," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 308-315, Summer.
  5. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  6. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
  7. Sanford Grossman & Oliver Hart, . "Disclosure Laws and Takeover Bids," Rodney L. White Center for Financial Research Working Papers 23-79, Wharton School Rodney L. White Center for Financial Research.
  8. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
  9. Reinganum, Jennifer F, 1988. "Plea Bargaining and Prosecutorial Discretion," American Economic Review, American Economic Association, vol. 78(4), pages 713-28, September.
  10. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
  11. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-97, September.
  12. I.P.L. P'ng, 1983. "Strategic Behavior in Suit, Settlement, and Trial," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 539-550, Autumn.
  13. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
  14. Jennifer F. Reinganum & Louise L. Wilde, 1986. "Settlement, Litigation, and the Allocation of Litigation Costs," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 557-566, Winter.
  15. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  16. Png, I. P. L., 1987. "Litigation, liability, and incentives for care," Journal of Public Economics, Elsevier, vol. 34(1), pages 61-85, October.
  17. Banks, Jeffrey S. & Sobel, Joel., 1985. "Equilibrium Selection in Signaling Games," Working Papers 565, California Institute of Technology, Division of the Humanities and Social Sciences.
  18. Dye, Ronald A, 1986. "Proprietary and Nonproprietary Disclosures," The Journal of Business, University of Chicago Press, vol. 59(2), pages 331-66, April.
  19. Joseph Farrell, 1985. "Voluntary Disclosure: Robustness of the Unraveling Result, and Comments on Its Importance," Working papers 374, Massachusetts Institute of Technology (MIT), Department of Economics.
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