Selective Disclosure in Overlapping Generations

TL;DR

This paper models how agents in an overlapping generations setting selectively disclose private signals, revealing that as communication becomes more reliable, agents tend to hide all but the most favorable information.

Contribution

It introduces a new overlapping generations model capturing strategic signal disclosure and shows how disclosure behavior evolves with communication reliability.

Findings

Agents become more selective in disclosing signals as communication improves.

In the limit, only the most favorable signals are disclosed.

The model highlights externalities in information passing across generations.

Abstract

We develop an overlapping generations model where each agent observes a verifiable private signal about the state and, with positive probability, also receives signals disclosed by his predecessor. The agent then takes an action and decides which signals to pass on. Each agent's action has a positive externality on his predecessor and his optimal action increases in his belief about the state. We show that as the probability that messages reach the next generation approaches one, agents become increasingly selective in disclosing information. In the limit, all signals except for the most favorable ones will be concealed.