Disclosure to a Psychological Audience
- American Economic Journal: Microeconomics (Forthcoming)
We study how a benevolent expert should disclose information to an agent with psychological concerns. We first provide a method to compute an optimal information policy for many psychological traits. The method suggests, for instance, that an agent suffering from temptation a la Gul and Pesendorfer (2001) should not know what he is missing, thereby explaining observed biases as an optimal reaction to costly self-control. We also show that simply recommending actions is optimal when the agent is intrinsically averse to in- formation but has instrumental uses for it. This result, which circumvents the failure of the Revelation Principle in psychological environments, simplifies disclosure and informs the debate regarding mandated disclosure.
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