Information Design

Paper Session

Saturday, Jan. 7, 2017 10:15 AM – 12:15 PM

Hyatt Regency Chicago, Field
Hosted By: Econometric Society
  • Chair: Tymofiy Mylovanov, University of Pittsburgh

Interim Bayesian Persuasion

Tymofiy Mylovanov
,
University of Pittsburgh
Navin Kartik
,
Columbia University
Anton Kolotilin
,
University of New South Wales
Thomas Troeger
,
University of Mannheim

Abstract

We provide a solution to the problem of Bayesian persuasion by a privately informed party (sender). Bayesian persuasion game has a perfect-Bayesian equilibrium that has a strong neologism-proofness property. Equilibrium allocations satisfying this property are characterized in terms of the players' incentive and participation constraints and can be computed using standard methods. We also show that any outcome of an equilibrium with extremal beliefs of a verifiable communication game can be supported by an incentive-compatible mechanism. Conversely, any outcome supported by a deterministic incentive-compatible mechanism is an outcome of a pure-strategy equilibrium of a verifiable communication game.

Information Design: The Epistemic Approach

Laurent Mathevet
,
New York University

Abstract

Information design studies how to disclose information to a group of interacting agents in order to influence their behavior. In this paper, we introduce a belief-based approach to the problem, viewing it as belief manipulation rather than as information disclosure. We characterize and then exploit
the equivalence between information structures and distributions over belief hierarchies. Our main result is a representation theorem that poses the design problem as a choice of an optimal distribution over a special family of belief-hierarchy distributions—the minimal consistent ones—subject to Bayes plausibility. A two-step decomposition of the theorem follows, leading to a concave-envelope representation of optimality that subsumes Kamenica and Gentzkow (2011)’s single-agent result. We apply our representation theorem to a managerial problem, where we study Bayes Nash information design, and to a classic investment game, where we study information design under bounded depths of reasoning.

Buyer-Optimal Demand and Monopoly Pricing

Daniele Condorelli
,
University of Essex
Balazs Szentes
,
London School of Economics and Political Science

Abstract

This paper analyzes a bilateral trade model where the buyer can choose any cumulative
distribution function (CDF) supported on [0; 1], which then determines her valuation. The seller, after observing the buyer's choice of the CDF but not its realization, gives a takeit-or-leave-it offer to the buyer. We characterize the unique equilibrium outcome of this game and show that in this outcome, the price and the payoffs of both the buyer and the seller are equal to 1/e. The equilibrium CDF of the buyer generates a unit-elastic demand on [1/e; 1].
JEL Classifications
  • D0 - General