ACQUISITION AND DISCLOSURE OF INFORMATION PRIOR TO SALE

This article analyzes incentives to acquire information about the value of things before sales transactions, and voluntary versus required disclosure of such information. Two distinctions are emphasized: whether information is mere foreknowledge or instead can raise value-has social value; and whether it is sellers or buyers who decide to acquire information. The main conclusions in the model are that voluntary disclosure results in socially excessive incentives to acquire information; mandatory disclosure is socially desirable for sellers; but for buyers, the freedom to keep silent may be needed to spur acquisition of socially desirable information.