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The value of mediated communication

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  • Salamanca, Andrés

Abstract

This paper characterizes optimal mediation in sender-receiver games. We assume that the mediator's objective is to maximize the ex-ante welfare of the sender. Mediated equilibria are defined by a set of linear incentive constraints. The Lagrange multipliers associated with these constraints yield shadow prices that are used to construct “virtual utility functions” that intuitively characterize the signaling costs of incentive compatibility. Importantly, we characterize the value of an optimal mediation plan (value of mediation) through the concavification of the sender's indirect virtual utility function over posterior beliefs. This result provides necessary and sufficient conditions under which a candidate mediation plan is optimal. An additional result establishes a bound on the number of messages that the sender must convey to achieve the value of mediation.

Suggested Citation

  • Salamanca, Andrés, 2021. "The value of mediated communication," Journal of Economic Theory, Elsevier, vol. 192(C).
    • Handle: RePEc:eee:jetheo:v:192:y:2021:i:c:s0022053121000089
    DOI: 10.1016/j.jet.2021.105191
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    Cited by:

    1. Laura Doval & Vasiliki Skreta, 2022. "Mechanism Design With Limited Commitment," Econometrica, Econometric Society, vol. 90(4), pages 1463-1500, July.
    2. Smolin, Alex & Doval, Laura, 2021. "Information Payoffs: An Interim Perspective," TSE Working Papers 21-1247, Toulouse School of Economics (TSE).
    3. Laura Doval & Alex Smolin, 2021. "Persuasion and Welfare," Papers 2109.03061, arXiv.org, revised Sep 2023.

    More about this item

    Keywords

    Communication games; Optimal mediation; Incentive compatibility; Virtual utility; Bayesian persuasion; Concavification;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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