Optimal Disclosure Decisions When There are Penalties for Nondisclosure∗
نویسنده
چکیده
We study a model of the seller of an asset who is liable for damages to buyers of the asset if, after the sale, the seller is discovered to have failed to disclose an estimate of the asset’s value that the seller knew prior to sale. The model yields some surprising predictions concerning how the seller’s disclosure decision changes with changes in the severity of this liability, and with other parameters of the model, including the precision of the estimate and whether the seller behaves myopically or nonmyopically.
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