Developing a Reputation for Reticence
Author(s)Grubb, Michael D.
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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.
DepartmentSloan School of Management
Journal of Economics and Management Strategy
John Wiley & Sons, Inc.
Grubb, Michael D. “Developing a Reputation for Reticence.” Journal of Economics & Management Strategy 20.1 (2011) : 225-268.
Author's final manuscript