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The wrong kind of transparency

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  • Prat, Andrea

Abstract

In a model of career concerns for experts, when is the principal hurt from observing more information about her agent? This paper introduces a distinction between information on the consequence of the agent's action and information directly on the agent's action. It is the latter kind that can hurt the principal by engendering conformism, which worsens both discipline and sorting. The paper identifies a necessary and sufficient condition on the agent signal structure under which transparency on action is detrimental to the principal. The paper also shows the existence of complementarities between transparency on action and transparency on consequence. The results are used to interpret existing disclosure policies in politics, corporate governance, and delegated portfolio management.

Suggested Citation

  • Prat, Andrea, 2002. "The wrong kind of transparency," LSE Research Online Documents on Economics 3679, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:3679
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    File URL: http://eprints.lse.ac.uk/3679/
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    More about this item

    Keywords

    transparency; career concerns; expert agents;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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