2008 Volume 38 Issue 4 Pages 889-907
Risk information disclosure by companies has recently become headline news in Japan. In risk communication situations, companies must disclose risk information to customers. However, there are incentives not to do so. Moreover, a gap lies between the amount of risk information known by the companies and the amount of risk information given to the customers. Using game theory, Umehara and Ohta (2005) develops game models for risk information disclosure interactions between government agencies and the public that interpret the public's payoff structures using March and Simon's theory of satisficing decision-making, and that interpret government agencies' payoff structures using Tversky and Kahneman's cumulative prospect theory.
We use this risk information disclosure game model to analyze the recall of products by an automobile maker and classify the interactions between the company and its customers into five games: a voluntary disclosure game, risk information searching games (1, 2, 3), and a compulsory disclosure game. The transitions that a company manager makes from one game to another correspond to that manager's subjective risk-assessment of the probability that non-disclosure would be discovered by the customer. If the probability of discovery is deemed to be low, managers play a compulsory disclosure game, and if it is deemed high, they play a voluntary disclosure game.
Customers searching activities increase the risk-probability assessment and hasten a manager's change from a compulsory disclosure game to a risk information searching game. Thus, if there are a lot of customers searching for information, managers will be pressed to disclose risk information.
Next, we use the risk information disclosure game as a model to assess methods for reducing the information gap between companies and customers. The role of a guardian agent in this is examined. We find that the presence of the agent causes managers playing the game to change from non-disclosure to disclosure. Finally, from an operation-cost viewpoint, risk information disclosure in an environment where a guardian agent is always active is considered.
On the basis of this study, we believe that the information gap between government agencies and the public would be far smaller if explanations and support are provided from experts in related fields, such as government agencies or facilitators.
JEL Classification: C72, D81, D82, M14
