Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/228351
Authors: 
Sheth, Jesal
Year of Publication: 
2019
Series/Report no.: 
CeDEx Discussion Paper Series No. 2019-04
Abstract: 
The theory of voluntary disclosure of information posits that market forces lead senders to disclose information through a process of unravelling. This prediction requires that receivers hold correct beliefs and, in equilibrium, make adverse inferences about non-disclosed information. Previous research finds that receivers do not sufficiently infer non-disclosure as bad news, leading to the failure of complete unravelling. This paper experimentally examines whether competition between senders when receivers strongly prefer disclosed over nondisclosed information increases unravelling. We further examine whether receivers' naivety about non-disclosed information decreases with competition between senders. We find that complete unravelling fails to occur without competition. However, with competition, there is significantly higher unravelling such that it increases receivers' overall welfare. Interestingly, receivers' welfare increases despite no significant difference in their guesses or beliefs about non-disclosed information relative to the treatment without competition. We conclude that competition between senders positively affects disclosure of information and receivers' welfare.
Subjects: 
Competition
experiment
disclosure
verifiable information
conflict of interest
JEL: 
C92
D82
D83
L15
Document Type: 
Working Paper

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