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De-biasing strategic communication


Gesche, Tobias (2017). De-biasing strategic communication. Working paper series / Department of Economics 216, University of Zurich.

Abstract

This paper studies the effect of disclosing conflicts of interest on strategic communication when the sender has lying costs. I present a simple economic mechanism under which such disclosure often leads to more informative, but at the same time also to more biased messages. This benefits rational receivers but exerts a negative externality from them on naive or delegating receivers; disclosure is thus not a Pareto-improvement among receivers. I identify general conditions of the information structure under which this effect manifests and show that whenever it does, full disclosure is socially inefficient. These results hold independently of the degree of receivers' risk-aversion and for an arbitrary precision of the disclosure statement.

Abstract

This paper studies the effect of disclosing conflicts of interest on strategic communication when the sender has lying costs. I present a simple economic mechanism under which such disclosure often leads to more informative, but at the same time also to more biased messages. This benefits rational receivers but exerts a negative externality from them on naive or delegating receivers; disclosure is thus not a Pareto-improvement among receivers. I identify general conditions of the information structure under which this effect manifests and show that whenever it does, full disclosure is socially inefficient. These results hold independently of the degree of receivers' risk-aversion and for an arbitrary precision of the disclosure statement.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D82, D83, L51
Uncontrolled Keywords:Strategic communication, misreporting, conflict of interest, disclosure
Language:English
Date:July 2017
Deposited On:27 Jan 2016 15:21
Last Modified:21 Nov 2017 18:22
Series Name:Working paper series / Department of Economics
Number of Pages:38
ISSN:1664-7041
Additional Information:Revised version
Official URL:http://www.econ.uzh.ch/static/wp/econwp216.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers-new.php

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