IDEAS home Printed from
   My bibliography  Save this paper

Dynamic Information Design with Diminishing Sensitivity Over News


  • Jetlir Duraj
  • Kevin He


A benevolent sender communicates non-instrumental information over time to a Bayesian receiver who experiences gain-loss utility over changes in beliefs ("news utility"). We show how to compute the optimal dynamic information structure for arbitrary news-utility functions. With diminishing sensitivity over the magnitude of news, one-shot resolution of uncertainty is strictly suboptimal under commonly used functional forms. Information structures that deliver bad news gradually are never optimal. We identify additional conditions that imply the sender optimally releases good news in small pieces but bad news in one clump. When the sender lacks commitment power, diminishing sensitivity leads to a credibility problem for good-news messages. Without loss aversion, the babbling equilibrium is essentially unique. More loss-averse receivers may enjoy higher equilibrium news-utility, contrary to the commitment case. We discuss applications to media competition and game shows.

Suggested Citation

  • Jetlir Duraj & Kevin He, 2019. "Dynamic Information Design with Diminishing Sensitivity Over News," Papers 1908.00084,, revised Nov 2019.
  • Handle: RePEc:arx:papers:1908.00084

    Download full text from publisher

    File URL:
    File Function: Latest version
    Download Restriction: no

    References listed on IDEAS

    1. Robert J. Aumann, 1995. "Repeated Games with Incomplete Information," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011476.
    2. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    3. Pagel, Michaela, 2012. "Expectations-Based Reference-Dependent Preferences and Asset Pricing," MPRA Paper 47933, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1908.00084. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.