Information Shrouding and the Governmental Supply of Goods and Services: An Economic Perspective

The chapter develops a hypothesis to account for the easily observed fact that the shrouding of information - such as the concealment, distortion, and falsification of information - is a feature of the supply side of both the private and public sectors. Consumers and citizens need information to make decisions. In some circumstances, suppliers - business enterprises and public sector actors - can raise the cost of searching for the information required by demanders to choose efficient courses of action by shrouding information. When engaging in activities that make searching less attractive to citizens is expected to be profitable, suppliers will contemplate undertaking information shrouding. Assuming that the net benefits to private and public suppliers are positive, these suppliers will shroud information only if by so doing they can also segment market participants and citizens into clusters, with the members of at least one of these clusters having demand curves for the good and/or service suppliers are offering that, in the relevant range, has a price elasticity that is greater than one. Sometimes and for some goods and/or services, the emergence of exploitable clusters appears to be almost spontaneous; at other times and for other goods and/or services, the emergence of exploitable clusters requires the investment of resources by suppliers.