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Complex Disclosure

Author

Listed:
  • Ginger Zhe Jin

    (University of Maryland, College Park, Maryland 20742; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Michael Luca

    (Harvard Business School, Boston, Massachusetts 02163)

  • Daniel Martin

    (Northwestern University Kellogg School of Management, Evanston, Illinios 60208)

Abstract

We present evidence that unnecessarily complex disclosure can result from strategic incentives to shroud information. In our laboratory experiment, senders are required to report their private information truthfully but can choose how complex to make their reports. We find that senders use complex disclosure more than half the time. This obfuscation is profitable because receivers make systematic mistakes in assessing complex reports. Regression and structural analysis suggest that these mistakes could be driven by receivers who are naive about the strategic use of complexity or overconfident about their ability to process complex information.

Suggested Citation

  • Ginger Zhe Jin & Michael Luca & Daniel Martin, 2022. "Complex Disclosure," Management Science, INFORMS, vol. 68(5), pages 3236-3261, May.
  • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:5:p:3236-3261
    DOI: 10.1287/mnsc.2021.4037
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    More about this item

    Keywords

    disclosure; complexity; experiments; naivete; overconfidence;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • K2 - Law and Economics - - Regulation and Business Law
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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