Working Paper: NBER ID: w24675
Authors: Ginger Zhe Jin; Michael Luca; Daniel J. Martin
Abstract: We present evidence that unnecessarily complex disclosure can result from strategic incentives to shroud information. In our lab experiment, senders are required to report their private information truthfully, but can choose how complex to make their reports. We find that senders use complex disclosure over half the time. This obfuscation is profitable because receivers make systematic mistakes in assessing complex reports. Regression and structural analysis suggest that these mistakes could be driven by receivers who are naive about the strategic use of complexity or overconfident about their ability to process complex information.
Keywords: complex disclosure; consumer behavior; strategic incentives
JEL Codes: D8; D91; K2; L15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Complexity (C69) | Receiver Mistakes (Y60) |
| Complex Disclosures (Y20) | Higher Guesses (C51) |
| Overconfidence and Naivete (D83) | Systematic Overestimation of Secret Number (C13) |
| Complexity (C69) | Systematic Mistakes (C83) |
| Complex Disclosures (Y20) | Systematic Mistakes (C83) |