MPhil+PhD in Economics
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Job Market Paper:
Knowing More Can Hurt: An Experiment
Abstract:
Theory suggests that mandatory disclosure of private interest can be harmful, as it deters the transmission of private information. Previous experiments, however, show that disclosing private interest can be beneficial through the psychological effects of moral licensing and insinuation anxiety. We conducted an experiment to investigate the effect of information disclosure in the setting of strategic information transmission with unknown motives. Our experimental design captures the core spirit of Li and Madarasz (2008), in which a sender has partially aligned interest with a receiver and has private information about his own bias and the state. We show that disclosing private interest results in a unique babbling equilibrium, whereas informative equilibria exist when the private interest is hidden. We then use neologism-proofness and a best-response dynamics approach to sharpen the theoretical prediction. Our experimental evidence provides support for the theory, as we find that hidden information facilitates information transmission and improves welfare. We perform a level-k analysis to explain this phenomenon and find that a source of the welfare loss when private interest is disclosed is the mismatch between senders and receivers with different levels of sophistication. Meanwhile, our experimental data are inconsistent with the phenomena of moral licensing and insinuation anxiety, suggesting that these psychological effects do not persist when direct conflict of interest becomes partially aligned interests.
Research Interests:
Experimental Economics, Industrial Organization, Applied Microeconomics