Theoretical Economics 18 (2023), 15–36
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Optimal persuasion via bi-pooling
Itai Arieli, Yakov Babichenko, Rann Smorodinsky, Takuro Yamashita
Abstract
Mean-preserving contractions are critical for studying Bayesian models of information design. We introduce the class of bi-pooling policies, and the class of bi-pooling distributions as their induced distributions over posteriors. We show that every extreme point in the set of all mean-preserving contractions of any given prior over an interval takes the form of a bi-pooling distribution. By implication, every Bayesian persuasion problem with an interval state-space admits an optimal bi-pooling distribution as a solution, and conversely, for every bi-pooling distribution, there is a Bayesian persuasion problem for which that distribution is the unique solution
Keywords: Bayesian persuasion, mean preserving contraction, bi-pooling, information disclosure, price function, signaling, extreme points
JEL classification: C72,D82,D83
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