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Stealth Startups, Clauses, and Add-ons: A Model of Strategic Obfuscation

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Listed:
  • Monte, Daniel
  • Linhares, Luis Henrique

Abstract

Obfuscation is ubiquitous and often intentional. We consider an uninformed Principal who chooses how costly it will be for the Agent to obtain and process new information. Thus, obfuscation and transparency are endogenous to the problem at hand. Using a rational inattention framework, we study the Principal's optimal induced cost of processing information and examine necessary and sufficient conditions for obfuscation. We characterize the Principal's optimal obfuscation for the class of state independent preferences. We apply our model to examples such as stealth startups, companies with unnecessarily complicated contracts, and firms whose products have varying features that disguise add-ons.

Suggested Citation

  • Monte, Daniel & Linhares, Luis Henrique, 2023. "Stealth Startups, Clauses, and Add-ons: A Model of Strategic Obfuscation," MPRA Paper 115926, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:115926
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    References listed on IDEAS

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    More about this item

    Keywords

    stealth startups; information design; rational inattention;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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