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Forced information disclosure and the fallacy of transparency in markets

Author

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  • Cason, Timothy N.
  • Plott, Charles R.

Abstract

A theory advanced in regulatory hearings holds that market performance will be improved if one side of the market is forced to publicly reveal preferences. For example, wholesale electricity producers claim that retail electricity consumers would pay lower prices if wholesale public utility demand is disclosed to producers. Experimental markets studied here featured decentralized, privately negotiated contracts, typical of the wholesale electricity markets. Two conclusions emerge: (i) such markets generally converge to the competitive equilibrium and (ii) forced disclosure works to the disadvantage of the disclosing side. Information disclosure would result in higher wholesale and thus higher retail electricity prices

Suggested Citation

  • Cason, Timothy N. & Plott, Charles R., 2004. "Forced information disclosure and the fallacy of transparency in markets," Working Papers 1202, California Institute of Technology, Division of the Humanities and Social Sciences.
    • Handle: RePEc:clt:sswopa:1202
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    File URL: http://www.hss.caltech.edu/SSPapers/wp1202.pdf
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    Cited by:

    1. Rietz, Thomas A. & Sheremeta, Roman M. & Shields, Timothy W. & Smith, Vernon L., 2013. "Transparency, efficiency and the distribution of economic welfare in pass-through investment trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 257-267.
    2. Shakun D. Mago & Anya C. Savikhin & Roman M. Sheremeta, 2012. "Facing Your Opponents: Social identification and information feedback in contests," Working Papers 12-15, Chapman University, Economic Science Institute.
    3. Sheremeta, Roman, 2009. "Essays on Experimental Investigation of Lottery Contests," MPRA Paper 49888, University Library of Munich, Germany.
    4. C. Duke & L. Gangadharan, 2005. "Salinity in Water Markets : An ExperimentalInvestigation of the Sunraysia Salinity Levy, Victoria," Department of Economics - Working Papers Series 950, The University of Melbourne.
    5. Bart Wilson & Arthur Zillante, 2010. "More Information, More Ripoffs: Experiments with Public and Private Information in Markets with Asymmetric Information," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(1), pages 1-16, February.

    More about this item

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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