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Daniel Martin - July 21, 2014 @ 3PM

 Monday, July 21st 3:00-4:15PM, Room 3180 Grainger Hall

Daniel Martin (Paris School of Economics) will be presenting "Failures of Unraveling in Disclosure Experiments". Poster attached. Please also see the abstract below. You can learn more about Daniel's research by visiting: http://www.martinonline.org/daniel/

A central prediction of information economics is that market forces can lead businesses to voluntarily provide information about the quality of their products. The iterative mechanism (known as unraveling) that produces this result is intuitive and powerful, yet little voluntary disclosure is observed in the field. In this paper, we provide a potential explanation that applies across institution contexts by identifying a fundamental breakdown in the mechanics of unraveling. Using a series of laboratory experiments, we implement a simple disclosure game in which senders can verifiably report their type to receivers, and we find that senders disclose less often than equilibrium would predict. However, senders do not have an incentive to disclose more. The logic of unraveling fails because receivers are not sufficiently skeptical about nondisclosure. However, we are able to substantially increase the rate of disclosure in our experiment through a simple intervention in which we provide receivers with summary information about the disclosure decisions of past senders.
Jul 17, 2014, 9:54 PM