The Impact of Mandatory Disclosure on Information Acquisition: Theory and Experiment
This study experimentally investigates the interaction between firm fs information acquisition choice and mandatory disclosure in the presence of proprietary costs. The results demonstrate that mandatory disclosure diminishes firm fs incentive to acquire industry-wide demand information when information acquisition is costly and endogenous. Further, I also show that firm fs production decision is improved by acquiring information. Taken together, although acquiring information improves firm fs production decision, mandatory disclosure diminishes firm fs incentive to do so, and thus, deteriorates firm fs information environment. This leads to inefficient production, which in turn, might have a substantial impact on market outcomes.
|Date of creation:||Feb 2013|
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