The Cost of Clarity: Navigating Transparency in Information Asymmetry

In this article, we explore the concept of information asymmetry and its impact on decision-making processes in various fields, including finance, healthcare, and cybersecurity. We examine two types of information structures – overt persuasion (OP) and covert signaling (CS) – which differ in how much information is shared between the sender and receiver.
Overt Persuasion: In OP, the sender publicly announces its information structure, creating a transparent disclosure of information. This allows the receiver to form a belief system based on the provided information, similar to how a teacher might teach a student.
Covert Signaling: On the other hand, CS involves keeping the information structure private throughout the gameplay. The receiver can only observe the signal, similar to how a chef might leave clues for a detective to solve a mystery.
We compare and contrast these two information structures in terms of their advantages and disadvantages, as well as their implications on ethical practices. While OP promotes transparency and accountability, CS allows for more flexibility and strategic decision-making. However, it also raises concerns about exploitation and deception.
The article concludes by emphasizing the importance of considering information structures in various contexts to ensure fairness and ethical practices. By understanding how information is shared and used, we can make informed decisions that benefit all parties involved.