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Austensmith Feddersen (2008) - Public Disclosure Private Revelation Or Silence (view source)
Revision as of 18:49, 20 June 2010
, 18:49, 20 June 2010→The Model
*A type <math>t\,</math> employee chooses from <math>a_e(v,t) \in \{\phi,p.w\}\,</math>
**If <math>\phi\,</math> then nature reveals the violation with probability <math>q_{\phi}v\,</math>, where <math>q_{\phi} \in \left [0,1\right)\,</math>. The revelation of the information by nature is modelled as <math>\Omega_{\phi} \in \{0,1\}\,</math>
**If <math>p\,</math> then the manager chooses whether or not to fix the violation. Fixing costs the firm <math>\alpha v\,</math>, <math>\alpha >0\,</math>. Let <math>a_m(v,s) \in \{f,\sim f\}\,</math>. If not fix (<math>\sim f\,</math>), then nature chooses to reveal the violation with probability <math>q_pv\,</math>, where <math>q_p \in (q_{\phi},1)\,</math>, and again the revelation is modelled as <math>\Omega_{p} \in \{0,1\}\,</math>. If the violation is fixed it is never revealed.
**If <math>w\,</math>, then <math>v\,</math> becomes common knowledge (denoted <math>\Omega_{w} \equiv 1\,</math>).
The solution concept is Perfect Bayesian equilibria in (weakly) undominated strategies.
==Three Benchmark Cases==
