Information and Disclosure Duties from a Law-and-Economics Perspective: A Primer

I. Introduction | II. Imperfect Information as a Source of Welfare Loss | 1. The Coase Theorem, Allocative Efficiency and the Assumption of Complete Information | 2. Information Asymmetries as a Source of Welfare Loss | a) The problem of adverse selection | b) Wasteful costs of searching for information | III. Welfare Gains by Information Duties | 1. Addressing the Problem of Adverse Selection | a) Voluntary information | aa) Signaling and the “unraveling” of information asymmetries through competition | bb) Limits of information competition and selective disclosure | b) Disclosure duties | 2. Beyond Adverse Selection: Disclosure Duties as a Means to Protect the Naїve | 3. Saving Wasteful Costs of Searching for Information | IV. The Costs of Information and Disclosure Duties | 1. Curbing Incentives for the Production of Socially Useful Information | a) Adventitiously acquired information | b) Intentionally acquired information: Productive vs. redistributive information | c) Sellers’ incentives to acquire information and mandatory disclosure | 2. Curbing Incentives for the Efficient Utilization of Information | 3. Further Costs of Mandatory Disclosure | V. The Limits of Information and Disclosure Duties | 1. Bounded Rationality and Information Overload | 2. Lack of Understanding due to Deficient Prior Knowledge | 3. Critique of the Conventional Disclosure Strategy and the Legislatures’ Response | VI. Conclusion