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| Author: | Anctil, R.M. (et al.) |
| Title: | Information transparency and coordination failure: Theory and experiment |
| Journal: | Journal of Accounting Research
2004 : MAY, 42:2, p. 159-195 |
| Index terms: | Management Industries Corporate governance Decision making Disclosure |
| Language: | eng |
| Abstract: | This paper examines the effect of higher order beliefs on the ability of decentralized decision makers to coordinate and take advantage of improvements in information transparency that can increase welfare. Theories addressing this question have not been empirically explored. This paper studies coordination in a laboratory experiment with privately informed decision makers. Economic outcomes in the setting depend both on agents' rational beliefs (here as: r.b.) regarding economic fundamentals and on their r.b. regarding the beliefs of other agents. Increasing information transparency mitigates uncertainty about economic fundamentals but may increase strategic uncertainty, precipitating multiple equilibria and less efficient group outcomes. There is provided evidence that sometimes the equilibrium attained by creditors is inferiour from a welfare perspective to other available equilibria. Risk dominance appears to determine equilibrium selection in this study's setting. |
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