Costly Disclosures in a Voluntary Disclosure Model with an Opponent

This paper analyzes voluntary disclosure equilibria when the voluntary disclosure model presented inWAGENHOFER (1990) is modified so as to include fixed disclosure costs as used in VERRECCHIA (1983). It turns out that incorporating both disclosure and proprietary costs rules out full disclosure equilibria. Moreover, it yields additional disclosure equilibria that differ significantly from the equilibria in VERRECCHIA (1983) and WAGENHOFER (1990). Thus, in the extended model the firm is provided with additional incentives to withhold its private information from the public.