'Where Ignorance is Bliss, 'Tis Folly to Be Wise': Transparency in Contests

Abstract

Increasingly, lobbying groups are subject to transparency requirements, obliging them to provide detailed information about their business. We study the effect this transparency policy has on the nature of lobbying competition. Under mild conditions, mandated transparency leads to an increase in wastefulness of lobbying competition and a decline in expected allocative efficiency. Hence we identify a negative side-effect of transparency policy, which also has implications for various other fields such as political campaigning or firm competition.

Information Disclosure in Contests: A Bayesian Persuasion Approach

“…Denter et al . () obtained the same result by comparing no and full disclosure . Our analysis demonstrates that their result is robust if more sophisticated disclosure policies are allowed in the contest organiser's choice.…”

“…Denter et al . () compare full disclosure and no disclosure with binary valuations. In our framework with N ≥ 2, it can be shown that full disclosure dominates no disclosure if and only if the commonly known contestant's valuation is above a cut‐off…”

“…The basic framework is borrowed from Hurly and Shogren (, b) and Denter et al . (). Two risk‐neutral contestants, A and B , compete for a prize by exerting irreversible efforts simultaneously.…”

“…In research tournaments, research proposals serve as good signals of firms’ research capabilities; how to reveal such information to firms can influence the competition. In the US, political candidates are required by the Federal Election Campaign Act to reveal the sources of campaign contributions and report campaign expenditures, which convey information about the extent of a candidate's financial support (Denter et al ., for more examples).…”

Ranking Disclosure Policies in All‐pay Auctions

“…Our paper is also related to the literature on players' incentive to acquire and share information in different auction formats, such as Persico (), Yildirim (), Compte and Jehiel (), Szech (), Morath and Münster (), Denter, Morgan, and D. Sisak (), and Kovenock, Morath, and Münster (). In particular, in contrast to this paper, Denter, Morgan, and Sisak () consider one‐sided asymmetric information in an all pay setting.…”