Developing a Reputation for Reticence

A sender who has disclosable information with probability less than one may partially conceal bad news by choosing to withhold information and pooling with uninformed types. The success of this strategy depends on receivers' beliefs about the probability that the sender has disclosable news. In...

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Bibliographic Details
Published inJournal of economics & management strategy Vol. 20; no. 1; pp. 225 - 268
Main Author Grubb, Michael D.
Format Journal Article
LanguageEnglish
Published Malden, USA Blackwell Publishing Inc 01.03.2011
Wiley Subscription Services, Inc
Subjects
Asymmetric information
Beliefs
Blair, Tony
Disclosure
Dynamics
Earnings
Economic models
Information dissemination
Nondisclosure
Perception
Probability
Reputations
Strategic behaviour
Studies
United Kingdom > UK
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Summary:A sender who has disclosable information with probability less than one may partially conceal bad news by choosing to withhold information and pooling with uninformed types. The success of this strategy depends on receivers' beliefs about the probability that the sender has disclosable news. In a dynamic context, informed senders try to cultivate a reputation for reticence either by concealing good news along with the bad, or by concealing some good news and disclosing some bad news. A reputation for reticence is valuable because it makes receivers less skeptical of past or future nondisclosures. The model provides insight into the choice by firms such as Google not to disclose quarterly earnings guidance to analysts, as well as Tony Blair's reticence over his son's vaccine record during the measles–mumps–rubella scare in the United Kingdom.
Bibliography:ark:/67375/WNG-NPB72LRP-Z
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ArticleID:JEMS288
I am very grateful to Jeremy Bulow, Jonathan Levin, Margaret Meyer, and Andy Skrzypacz for many valuable suggestions and discussions. For helpful comments, I also thank Carlos Corona, Erik Eyster, Bob Gibbons, David McAdams, Paul Oyer, John Roberts, Rebecca Stone, and Steven Tadelis. I am thankful for financial support from the Taube Scholarship Fund Fellowship through a grant to the Stanford Institute for Economic Policy Research, and from the State Farm Companies Foundation Doctoral Award.
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ISSN:1058-6407
1530-9134
DOI:10.1111/j.1530-9134.2010.00288.x