Information Rules

TL;DR

Laws regarding information acquisition and disclosure are complex, with different types of information having varying effects on value and distribution.

Transcript

the legal regulation of information acquisition and disclosure is a vast and complex area comprising intellectual property and much much more but today I want to talk first about three dichotomies the first two of which are captured in the following two-by-two table the columns in this table represent two different ways in which information is acqu... Read More

Key Insights

• 💁 Differentiating between deliberately acquired and casually acquired information is crucial in determining the risks and benefits of disclosure.
• 💁 Some information enhances value, while others only redistribute it.
• 👻 The law often requires sellers to disclose information while allowing buyers more discretion.
• 💁 There are five possible legal regimes for information disclosure, each with its own advantages and disadvantages.
• ❓ Mandating disclosure of what should have been known can prevent willful ignorance.

Questions & Answers

Q: What is the difference between deliberately acquired and casually acquired information?

Deliberately acquired information is intentionally sought out, such as learning tax law. Casually acquired information is easily known without much effort, like knowing the existence of the United States.

Q: How does information disclosure affect value?

Disclosure of information can create value by enabling better decision-making or more accurate pricing. However, some information only affects how value is distributed among people.

Q: Why might the law require sellers to disclose information but not buyers?

As a descriptive matter, the law is more likely to mandate disclosure by sellers. This is because undisclosed information can lead to unfair transactions. Buyers generally have less information asymmetry.

Q: What are the different legal regimes for information disclosure?

The law can prohibit disclosure, allow non-credible disclosure, adopt a laissez-faire approach, mandate disclosure, or require disclosure of what should have been known.

Summary & Key Takeaways

• There are three dichotomies in the legal regulation of information acquisition and disclosure: deliberately acquired vs casually acquired information, value-enhancing vs redistributed information, and disclosure by sellers vs disclosure by buyers.

• Different types of information have different effects: some increase value while others only affect distribution.

• There are five possible legal regimes for information disclosure: prohibition, credible disclosure, laissez-faire, mandate disclosure, and mandate disclosure of what should have been known.