Does it pay to voluntarily disclose private information?
This paper studies how strategic interaction between players can influence their decisions as to whether to acquire information and whether to reveal their private information to others. We show how a player can increase his utility by disclosing part of his private information, when such disclosure stimulates others to produce new information that is useful for him. We derive conditions for information disclosure to be the equilibrium strategy and solve for the equilibrium. When both traders are risk-neutral they each increase their profits by specializing in the types of information they acquire. This specialization encourages the traders to share information directly or through trades. When the traders have different risk preferences, the more risk averse trader may prefer to reveal his less precise information in order to stimulate information production by less risk averse traders. This strategy can give him higher utility than if he merely acquired information by himself.
|Date of creation:||01 Jun 2001|
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