When is it bad to disclose good news?

Rick Harbaugh and Theodore To offer an abstract:

Is it always wise to disclose good news?  We find that the worst sender with good news has the most incentive to disclose it, so reporting good news can paradoxically make the sender look bad.  If the good news is attainable by sufficiently mediocre types, or if the sender is already expected to be of a relatively high type, withholding good news is an equilibrium.  Since the sender has a legitimate fear of looking to anxious to reveal good news, having a third party disclose the news, or mandating that the sender disclose the news, can help the sender.  The predictions are tested by examining when economics faculty at different institutions use titles such as "Dr" and "Professor" in voicemail greetings and course syllabi.

Here is the paperHarbaugh’s home page has many interesting papers, most of all "Too Cool for School," which concerns the underexplored topic of "countersignaling."  He also has a paper on why the favorites save up their effort for the final round, and why status can make you risk-averse in gains but risk-loving in losses.  He is an underappreciated economist, and I thank Robin Hanson for the pointer to his work.

The bottom line: When it comes to titles, if the book lists "Ph.d." after the author’s name, run the other way.  Gregory Stock’s The Book of Questions is one notable exception to this rule.


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