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Voluntary Disclosure of Nonproprietary Information: A Complete Equilibrium Characterization
Author(s) -
Korn Evelyn,
Schiller Ulf
Publication year - 2003
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.0306-686x.2003.05494.x
Subject(s) - full disclosure , voluntary disclosure , private information retrieval , sequential equilibrium , set (abstract data type) , limit (mathematics) , point (geometry) , economics , equilibrium selection , characterization (materials science) , order (exchange) , mathematical economics , microeconomics , econometrics , accounting , game theory , computer science , repeated game , mathematics , finance , mathematical analysis , geometry , computer security , programming language , materials science , nanotechnology
The so‐called disclosure principle is a ‘puzzle’ in the accounting literature: Game theoretic models of financial markets show that in equilibrium firms should disclose all their private information. Yet, the result is not convincing. Researchers have therefore built sophisticated models in order to demonstrate for which reasons the disclosure principle might fail. This note shows that even in the original model there are multiple equilibria. In those equilibria good types disclose and bad types do not. The commonly known full disclosure equilibrium is a limit point of the equilibrium set.