Study reveals how disclosure influences risky project choices and inefficiency
The article explores how agents make choices between projects with uncertain outcomes, considering the impact of disclosing information to observers. The research shows that agents tend to choose riskier projects, even if they have lower expected returns. When a challenger can disclose information instead, the chosen project becomes excessively risky or risk-averse depending on who has better access to information. The study also identifies the agent's worst-case equilibrium payoff.