When Public Signals Backfire: Strategic Disclosure and Information Crowd-Out

We study voluntary disclosure when partially naive receivers observe a public signal correlated with the sender’s private information. We develop a framework in which the public signal changes how receivers interpret silence, and derive a closed-form disclosure threshold nesting classical unraveling. A laboratory experiment varying the correlation confirms our predictions: disclosure decreases as the signal becomes more favorable, and receiver guesses upon nondisclosure rise toward it. The public signal can crowd out disclosure, leaving receivers less informed than without it. This informational loss peaks at intermediate correlation, where the signal shifts beliefs yet remains too noisy to substitute for disclosure.