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Credibility for Sale: the Effect of Disclosure on Information Acquisition and Transmission

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Abstract

We study the effect of disclosure on information acquisition and transmission in a dynamic reputation model. In each period, to make a report to a client, an expert chooses between conducting a costly investigation or channeling a message from an interest group. We show that not disclosing the source of the expert's report may increase the frequency of investigation by the expert. Nevertheless, it decreases the quality of the clients' decisions. We demonstrate that, however, when the importance of decisions vary across time, when the interest groups are long-lived, or when the expert's clientele is growing in her reputation, nondisclosure may improve the quality of the clients' decisions.

Suggested Citation

  • Li, Ming & Tymofiy Mylovanov, 2009. "Credibility for Sale: the Effect of Disclosure on Information Acquisition and Transmission," Working Papers 09008, Concordia University, Department of Economics, revised Oct 2009.
    • Handle: RePEc:crd:wpaper:09008
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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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