Voluntary disclosure of precision information

This paper presents a model of an entrepreneur's acquisition and voluntary disclosure of precision information as a supplement to primary disclosure of an estimate of a tradable asset's value. Our analysis shows that equilibrium disclosure can be characterized by four regions. For estimates above (below) the prior expectation of the asset value, the entrepreneur discloses only high (low) precision information. The main idea is to enhance (diminish) confidence in estimates that improve upon (detract from) prior beliefs. We further show that the entrepreneur over-invests in the acquisition of precision information due to the option value of discretion over disclosure. (C) 2003 Elsevier B.V. All rights reserved