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Optimal Information Disclosure: Quantity vs. Quality

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  • Anton Kolotilin

    ()
    (School of Economics, the University of New South Wales)

Abstract

A sender chooses ex ante how her information will be disclosed to a privately informed receiver who then takes one of two actions. The sender wishes to maximize the probability that the receiver takes the desired action. The sender faces an ex ante quantity-quality tradeoff: sending positive messages more often (in terms of the sender's information) makes it less likely that the receiver will take the desired action (in terms of the receiver's information). Interestingly, the sender's and receiver's welfare is not monotonic in the precision of the receiver's private information: the sender may find it easier to influence a more informed receiver, and the receiver may suffer from having more precise private information. Necessary and sufficient conditions are derived for full and no information revelation to be optimal.

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File URL: http://research.economics.unsw.edu.au/RePEc/papers/2013-19.pdf
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Bibliographic Info

Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2013-19.

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Length: 40 pages
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:swe:wpaper:2013-19

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Keywords: information disclosure; persuasion; informed decision maker; two-way communication;

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References

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  1. Michael Ostrovsky & Michael Schwarz, 2008. "Information Disclosure and Unraveling in Matching Markets," NBER Working Papers 13766, National Bureau of Economic Research, Inc.
  2. Luis Rayo & Ilya Segal, 2010. "Optimal Information Disclosure," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 949 - 987.
  3. Ivanov, Maxim, 2010. "Informational control and organizational design," Journal of Economic Theory, Elsevier, vol. 145(2), pages 721-751, March.
  4. Mikhail Golosov & Vasiliki Skreta & Aleh Tsyvinski & Andrea Wilson, 2011. "Dynamic Strategic Information Transmission," EIEF Working Papers Series 1110, Einaudi Institute for Economics and Finance (EIEF), revised May 2011.
  5. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
  6. Anton Kolotilin, 2013. "Experimental Design to Persuade," Discussion Papers 2013-17, School of Economics, The University of New South Wales.
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