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The Optimal Amount of Discretion to Allow in Disclosure

Michael J. Fishman and Kathleen M. Hagerty
The Quarterly Journal of Economics
Vol. 105, No. 2 (May, 1990), pp. 427-444
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2937794
Page Count: 18
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The Optimal Amount of Discretion to Allow in Disclosure
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Abstract

In this paper a party with private information can verifiably disclose some, but not all, of his information. The optimal amount of discretion to allow the informed party is studied. That is, should the informed party be allowed unlimited discretion in choosing which elements of his information set to disclose, or should restrictions be imposed that limit this discretion? The model is formulated in the spirit of a "persuasion game." It is demonstrated that under certain circumstances, rules that limit discretion increase the informativeness of disclosures and thus improve economic decisions.

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