Optimal Disclosure Policy and Undue Diligence

Andolfatto, David and Berentsen, Aleksander and Waller, Christopher. (2014) Optimal Disclosure Policy and Undue Diligence. Journal of Economic Theory, 149. pp. 128-152.

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While both public and private financial agencies supply asset marketswith large amounts of information, they do not generally disclose all assetrelatedinformation to the general public. This observation leads us to askwhat principles might govern the optimal disclosure policy for an assetmanager or financial regulator. To investigate this question, we study theproperties of a dynamic economy endowed with a risky asset, and withindividuals that lack commitment. Information relating to future asset returnsis available to society at zero cost. Legislation dictates whether thisinformation is to be made public or not. Given the properties of our environment,nondisclosure is generally desirable. This result is overturned,however, when individuals are able to access hidden information—whatwe call undue diligence—at sufficiently low cost. Information disclosure isdesirable, in other words, only to the extent that individuals can easilydiscover it for themselves.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Wirtschaftstheorie (Berentsen)
UniBasel Contributors:Berentsen, Aleksander
Item Type:Article, refereed
Article Subtype:Research Article
Note:Publication type according to Uni Basel Research Database: Journal article
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Last Modified:22 Nov 2018 14:59
Deposited On:12 Dec 2016 09:35

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