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Information acquisition and the value of bad news

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  • Ispano, Alessandro

Abstract

An interested party who controls both the acquisition and the transmission of information may find it optimal to disclose her evidence even when it is unfavorable. At the same time, the public does not necessarily make better decisions when there is more disclosure. The model provides a rationale for voluntary adverse announcements such as product recalls and earning warnings and implications for disclosure laws.

Suggested Citation

  • Ispano, Alessandro, 2018. "Information acquisition and the value of bad news," Games and Economic Behavior, Elsevier, vol. 110(C), pages 165-173.
    • Handle: RePEc:eee:gamebe:v:110:y:2018:i:c:p:165-173
    DOI: 10.1016/j.geb.2018.03.013
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    Cited by:

    1. Deversi, Marvin & Ispano, Alessandro & Schwardmann, Peter, 2021. "Spin doctors: An experiment on vague disclosure," European Economic Review, Elsevier, vol. 139(C).
    2. Aleksei Smirnov & Egor Starkov, 2022. "Bad News Turned Good: Reversal under Censorship," American Economic Journal: Microeconomics, American Economic Association, vol. 14(2), pages 506-560, May.
    3. Lodh, Rishab & Dey, Oindrila, 2023. "“Fake news alert!”: A game of misinformation and news consumption behavior," MPRA Paper 118371, University Library of Munich, Germany.

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    More about this item

    Keywords

    Persuasion; Adverse disclosure; Testing; Disclosure laws;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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