Essays on strategic naivety and disclosure of verifiable information

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Sheth, Jesal Dilip (2019) Essays on strategic naivety and disclosure of verifiable information. PhD thesis, University of Nottingham.

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Abstract

The unravelling prediction of the disclosure theory relies on the idea that market forces lead firms (information senders) to voluntarily disclose information about the quality of their products provided the information disclosed is verifiable and the costs of disclosure are negligible. This theoretical prediction requires that consumers (information receivers) hold correct beliefs and, in equilibrium, treat all non-disclosed information with extreme scepticism. Previous research finds that receivers are insufficiently sceptical, i.e. are ‘strategically naïve’, about non-disclosed information, which leads to the failure of complete unravelling.

This doctoral thesis systematically manipulates features of the decision environment in an experimental sender-receiver disclosure game to examine, a) how naivety responds to the inclusion of naturalistic elements in the experiment such as allowing communication opportunities between receivers and providing a natural context to the experiment, i.e. about the disclosure of a restaurant hygiene rating, and b) whether changing the market structure by introducing competition between senders of information encourages disclosure of information. We further explore whether comparative evaluation of information, which is a feature of introducing competition between senders, attenuates strategic naivety about non-disclosed information.

We find that complete unravelling of information, as predicted by theory, fails to occur in all our settings. Further, providing communication opportunities to receivers and providing a natural context to the experiment does not change the overall amount of information that is revealed by senders. However, we find that manipulating the sender’s side, i.e. by introducing competition between senders, increases disclosure of information compared to a setting without competition between senders.

On the receivers’ side, we find that strategic naivety is robust to, a) providing communication opportunities to receivers (i.e. consultation), b) adding a natural context to the experiment, and c) providing a setting with comparative evaluation of information, i.e. inferring about missing information in the presence of available information. Interestingly, we find that receivers’ welfare improves when we introduce competition between senders despite the presence of strategic naivety. Finally, we find that strategic naivety stems from receivers’ miscalibrated beliefs about the revealing behaviour of senders with intermediate and high quality (draws), as opposed to beliefs about the revealing behaviour of senders with low quality (draws).

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Montero, Maria
Nosenzo, Daniele
Keywords: Laboratory Experiment, Verifiable information, Conflict of Interest, Consultation, Context, Competition
Subjects: H Social sciences > HF Commerce
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > School of Economics
Item ID: 56019
Depositing User: Sheth, Miss Jesal Dilip
Date Deposited: 23 Jul 2019 04:40
Last Modified: 07 May 2020 11:31
URI: https://eprints.nottingham.ac.uk/id/eprint/56019

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