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Markovian persuasion with two states

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  • Ashkenazi-Golan, Galit
  • Hernández, Penélope
  • Neeman, Zvika
  • Solan, Eilon

Abstract

This paper addresses the question of how to best communicate information over time in order to influence an agent's belief and induced actions in a model with a binary state of the world that evolves according to a Markov process, and with a finite number of actions. We characterize the sender's optimal message strategy in the limit, as the length of each period decreases to zero. We show that the limit optimal strategy is myopic for beliefs smaller than the invariant distribution of the underlying Markov process. For beliefs larger than the invariant distribution, the optimal policy is more elaborate and involves both silence and splitting of the receiver's beliefs; it is not myopic.

Suggested Citation

  • Ashkenazi-Golan, Galit & Hernández, Penélope & Neeman, Zvika & Solan, Eilon, 2023. "Markovian persuasion with two states," Games and Economic Behavior, Elsevier, vol. 142(C), pages 292-314.
    • Handle: RePEc:eee:gamebe:v:142:y:2023:i:c:p:292-314
    DOI: 10.1016/j.geb.2023.08.001
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    References listed on IDEAS

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    1. Fabien Gensbittel, 2019. "Continuous-Time Markov Games with Asymmetric Information," Dynamic Games and Applications, Springer, vol. 9(3), pages 671-699, September.
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    6. Robert J. Aumann, 1995. "Repeated Games with Incomplete Information," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011476, December.
    7. Ashkenazi-Golan, Galit & Rainer, Catherine & Solan, Eilon, 2020. "Solving two-state Markov games with incomplete information on one side," Games and Economic Behavior, Elsevier, vol. 122(C), pages 83-104.
    8. Pierre Cardaliaguet & Catherine Rainer & Dinah Rosenberg & Nicolas Vieille, 2016. "Markov Games with Frequent Actions and Incomplete Information—The Limit Case," Mathematics of Operations Research, INFORMS, vol. 41(1), pages 49-71, February.
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    More about this item

    Keywords

    Bayesian persuasion; Information design; Markov games; Repeated games with incomplete information;
    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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