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None of your business! Efficient disclosure policies with heterogeneous audiences
1  Toulouse School of Economics
Academic Editor: Tatsuya Sasaki

Abstract:

This paper studies the efficient disclosure of performance information by a principal about an agent who has career concerns vis-à-vis heterogeneous employers. We consider a two-period model with career concerns la Holmstrom (1999) where, in the second period, employers hire for jobs more or less similar to the job the agent is evaluated for and thus value information differently. The principal trades off effort incentives and the agent's welfare, and does not internalize the audiences' payoffs. In equilibrium, the principal discloses information differentially and information structures are non-decreasing in job similarity. Setting high evaluation standards for less similar jobs is only efficient for incentivizing high effort. The results are robust to imperfect competition between effort-maximizing principals and generalize to setups with fixed or output-contigent transfers. The model can rationalize laws differentially restricting access to worker and consumer personal data, such as criminal records or credit scores, and inform debates regarding privacy protection.

Keywords: Career Concerns; Mechanism Design; Information Design; Privacy
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