Information acquisition and the value of transparency
نویسنده
چکیده
We analyze a game of persuasion which combines information acquisition and adverse selection. The sender can credibly transmit any information she gathers but cannot directly reveal her type to the receiver. Her payoff depends both on the news content and her perceived ability. We show that a sanitization equilibrium in which the sender reveals good news and conceals bad news prevails for mild adverse selection, while a full-reporting equilibrium in which she reveals both good and bad news prevails when adverse selection is more severe. The model provides a rationale for earning warnings and other adverse corporate disclosures. JEL codes: C72, D21, D82, D83, G12, G14.
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