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

  • Albert Breton
Part of the Studies in Public Choice book series (SIPC, volume 15)


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.


Price Elasticity Demand Curve Price Discrimination Monopoly Price Farm Salmon 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



I would like to thank Louis Imbeau, Pierre Salmon, and Anthony Scott for extensive written comments on the paper; comments that have led to more precision and to what I believe is a better product. I also wish to thank Simon Hug and the participants at the Congrès international des associations francophones de science politique (Université Laval, Québec, May 2007) for their verbal comments and questions. The usual caveat applies.


  1. Arrow, K. J. 1963. Uncertainty and the Welfare Economics of Medical Care. American Economic Review 53: 941–973. Reprinted in Arrow 1971. Essays in the Theory of Risk-Bearing, 177–211. Chicago: Markham Publishing.Google Scholar
  2. Breton, A. 1974. The Economic Theory of Representative Government. Chicago: Aldine.Google Scholar
  3. Breton, A. 2006. Modelling Vertical Competition. In Handbook of Fiscal Federalism, eds. A. Ehtisham and G. Brosio, 86–119. Cheltenham and Northampton: Edward Elgar.Google Scholar
  4. Breton, A. and A. Scott. 1978. The Economic Constitution of Federal States. Toronto: University of Toronto Press.Google Scholar
  5. Breton, A. and S. Dalmazzone. 2002. Information Control, Loss of Autonomy, and the Emergence of Political Extremism. In Political Extremism and Rationality, eds. A. Breton, G Galeotti, P. Salmon, and R. Wintrobe, 44–66. New York: Cambridge University Press.Google Scholar
  6. Buchanan, J. M. and M. R. Flowers. 1980, 1987. The Public Finances. An Introductory Textbook, Fifth and Sixth Editions, Homewood: Irwin.Google Scholar
  7. Burros, M. 2005. Stores Say Wild Salmon, but Tests Say Farm Bred. New York Times, April 10.Google Scholar
  8. Congleton, R. D. 1991. Information, Special Interests, and Single-Issue Voting. Public Choice 69: 39–49.CrossRefGoogle Scholar
  9. Consumer Reports. 2006. The Ethanol Myth. Yonkers, NY: Consumers Union, October.Google Scholar
  10. Consumer Reports. 2007. Buying Guide, Yonkers, NY: Consumers Union.Google Scholar
  11. Cutrera, A. 1900. La mafia e i mafiosi, Reber: Palermo.Google Scholar
  12. Darby, M. R. and E. Karni. 1973. Free Competition and the Optimal Amount of Fraud. Journal of Law and Economics, 16: 67–88.CrossRefGoogle Scholar
  13. Energy Research Advisory Board (ERAB). 1980. Gasohol, U.S. Department of Energy. Washington, DC.Google Scholar
  14. Energy Research Advisory Board (ERAB). 1981. Biomass Energy, U.S. Department of Energy. Washington, DC.Google Scholar
  15. Hahn, S. 2004. The Advertising of Credence Goods as a Signal of Product Quality. Manchester School 72: 50–59.CrossRefGoogle Scholar
  16. Hartle, D. G. 1982. The Revenue Budget Process of the Government of Canada: Description, Appraisal, and Proposals. Toronto: Canadian Tax Foundation.Google Scholar
  17. Inman, R. P. and D. L. Rubinfeld. 1997. The Political Economy of Federalism. In Perspectives on Public Choice. A Handbook, ed. D. C. Mueller, 73–105. Cambridge and New York: Cambridge University Press.Google Scholar
  18. Maslove, A. M., M. J. Prince, and G. B Doern. 1986. Federal and Provincial Budgeting, Toronto: University of Toronto Press.Google Scholar
  19. McCain, J. 2003. Statement of Senator McCain on the Energy Bill. Press Release, 19 November.Google Scholar
  20. Milgrom, P. and J. Roberts. 1986. Price and Advertising Signals of Product Quality. Journal of Political Economy 94: 796–821.CrossRefGoogle Scholar
  21. Musgrave, R. A. 1959. The Theory of Public Finance. A Study in Public Economy, New York: McGraw-Hill.Google Scholar
  22. Musgrave, R. A., P. B. Musgrave, and R. M. Bird. 1987. Public Finance In Theory and Practice, First Canadian Edition, Toronto and New York: McGraw-Hill Ryerson.Google Scholar
  23. Nelli, H. S. 1981. The Business of Crime. Italians and Syndicate Crime in the United States, Chicago: University of Chicago Press.Google Scholar
  24. Nelson, P. 1970. Information and Consumer Behavior. Journal of Political Economy 78: 311–329.CrossRefGoogle Scholar
  25. Nelson, P. 1974. Advertising as Information. Journal of Political Economy 82: 729–754.CrossRefGoogle Scholar
  26. Phlips, L. 1981. The Economics of Price Discrimination, Cambridge: Cambridge University Press.Google Scholar
  27. Pigou, A. C. 1932. The Economics of Welfare, Fourth Edition, London: Macmillan.Google Scholar
  28. Pimentel, D. and T. W. Patzek. 2005. Ethanol Production Using Corn, Switchgrass, and Wood; Biodiesel Production Using Soybean and Sunflower. Natural Resources Research 14: 65–76.CrossRefGoogle Scholar
  29. Rich, F. 2007. Earth to G.O.P.: The Gipper Is Dead.
  30. Runge, C. F. and B. Senauer. 2007. How Biofuels Could Starve the Poor. Foreign Affairs, May–June, 41–53.Google Scholar
  31. Salmon, P. 1987. Decentralisation as an Incentive Scheme. Oxford Review of Economic Policy 3: 24–43.CrossRefGoogle Scholar
  32. Salmon, P. 2002. Extremism and Monomania. In Political Extremism and Rationality, eds. A. Breton, G. Galeotti, P. Salmon, and R. Wintrobe, 69–88. New York: Cambridge University Press.Google Scholar
  33. Samuelson, P. A. 1954. The Pure Theory of Public Expenditure. Review of Economics and Statistics. 36: 387–389.CrossRefGoogle Scholar
  34. Reprinted in The Collected Scientific Papers of Paul A. Samuelson, ed. J. E. Stiglitz, Vol. II 1966. Cambridge, MA: MIT Press, 1223–1225.Google Scholar
  35. Scott, A. D. (forthcoming). Contracts in the Vertical Assignment of Powers over the Environment. In Governing the Environment: Salient Institutional Issues, eds. A. Breton, G. Brosio, S. Dalmazzone, and G. Garrone. Cheltenham: Edward Elgar.Google Scholar
  36. Shapouri, H., J. A. Duffield, and M Wang. 2002. The Energy Balance of Corn Ethanol: An Update, Washington, DC: USDA.Google Scholar
  37. Shapouri, H., J. A. Duffield, A. McAloon, and M Wang. 2004. The 2001 Net Energy Balance of Corn Ethanol (Preliminary), Washington, DC: USDA.Google Scholar
  38. Stigler, G. J. 1961. The Economics of Information. Journal of Political Economy 69: 213–285.CrossRefGoogle Scholar
  39. Reprinted in Stigler 1968. 171–190. The Organization of Industry, Chicago: University of Chicago Press.Google Scholar
  40. Stigler, G. J. 1987. The Theory of Price. Fourth Edition, New York: Macmillan.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of TorontoTorontoCanada

Personalised recommendations