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Compulsory Disclosure of Private Information: Theoretical and Experimental Results for the Acquiring-a-Company Game

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  • Werner Güth
  • Kerstin Pull
  • Manfred Stadler
  • Alexandra K. Zaby

Abstract

Compulsory disclosure of private information to an uninformed seller or buyer ofa company is intended to induce welfare-enhancing transactions. Our theoretical and experimental investigation suggests different effects of information disclosure on seller and buyer decisions. When sellers are uninformed, information disclosure increases the probability of transactions, whereas when buyers are uninformed, disclosure increases the probability of transactions only if sellers' valuation of the company is sufficiently high. We extend the acquiring-a-company game to derive predictions regarding the effects of disclosure and experimentally investigate the transition from asymmetric to symmetric information.

Suggested Citation

  • Werner Güth & Kerstin Pull & Manfred Stadler & Alexandra K. Zaby, 2019. "Compulsory Disclosure of Private Information: Theoretical and Experimental Results for the Acquiring-a-Company Game," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 175(3), pages 502-523.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2018-0013
    DOI: 10.1628/jite-2018-0013
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    References listed on IDEAS

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    1. Dennis A. V. Dittrich & Werner Güth & Martin G. Kocher & Paul Pezanis‐Christou, 2012. "Loss Aversion and Learning to Bid," Economica, London School of Economics and Political Science, vol. 79(314), pages 226-257, April.
    2. Nadine Chlaß, 2011. "On Individual Cursedness - How personality shapes individuals' sensitivity to incur a winner's curse -," Jena Economics Research Papers 2011-027, Friedrich-Schiller-University Jena.
    3. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
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    6. Brit Grosskopf & Yoella Bereby-Meyer & Max Bazerman, 2007. "On the Robustness of the Winner’s Curse Phenomenon," Theory and Decision, Springer, vol. 63(4), pages 389-418, December.
    7. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
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    Cited by:

    1. Güth Werner & Pull Kerstin & Stadler Manfred & Zaby Alexandra K., 2017. "Blindfolded vs. Informed Ultimatum Bargaining – A Theoretical and Experimental Analysis," German Economic Review, De Gruyter, vol. 18(4), pages 444-467, December.
    2. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2022. "Behavioral forces driving information unraveling," Discussion Papers, Research Unit: Market Behavior SP II 2022-206, WZB Berlin Social Science Center.
    3. Daniela Di Cagno & Lorenzo Ferrari & Werner Güth & Vittorio Larocca, 2021. "Transparent Dealing instead of Insider Haggling - Experimentally Analyzing an Institutional Choice for Repeated Trade," CEIS Research Paper 523, Tor Vergata University, CEIS, revised 18 Feb 2023.
    4. Jennie Huang & Judd B. Kessler & Muriel Niederle, 2024. "Fairness has less impact when agents are less informed," Experimental Economics, Springer;Economic Science Association, vol. 27(1), pages 155-174, March.
    5. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2023. "Behavioral forces driving information unraveling," Discussion Papers, Research Unit: Market Behavior SP II 2023-207, WZB Berlin Social Science Center.
    6. D. Di Cagno & A. Galliera & W. Güth & N. Pace & L. Panaccione, 2016. "Make-up and suspicion in bargaining with cheap talk: An experiment controlling for gender and gender constellation," Theory and Decision, Springer, vol. 80(3), pages 463-471, March.

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    More about this item

    Keywords

    compulsory disclosure of private information; acquiring a company; asymmetric information; experimental economics;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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