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Disclosure to an Audience with Limited Attention

  • David Hirshleifer

    (Fisher College of Business, Ohio State University)

  • SONYA SEONGYEON LIM

    (DePaul University)

  • Siew Hong Teoh

    (Fisher College of Business, Ohio State University)

In our model, informed players decide whether or not to disclose, and observers allocate attention among disclosed signals, and toward reasoning through the implications of a failure to disclose. In equilibrium disclosure is incomplete, and observers are unrealistically optimistic. Nevertheless, regulation requiring greater disclosure can reduce observers' belief accuracies and welfare. A stronger tendency to neglect disclosed signals increases disclosure, whereas a stronger tendency to neglect failures to disclose reduces disclosure. Observer beliefs are influenced by the salience of disclosed signals, and disclosure in one arena can crowd out disclosure in other fundamentally unrelated arenas.

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Paper provided by EconWPA in its series Game Theory and Information with number 0412002.

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Length: 49 pages
Date of creation: 04 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpga:0412002
Note: Type of Document - pdf; pages: 49. PDF
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