IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Persuasion for the Long-Run

Listed author(s):
  • James Best

    ()

    (Dept of Economics and Nuffield College, University of Oxford)

  • Daniel Quigley

    ()

    (Dept of Economics and Nuffield College, University of Oxford)

Registered author(s):

    We examine the limits of persuasion when credibility today is sustained by the incentive of future credibility. We model this as a long-run sender with private information playing a cheap talk game against short-run receivers where there is a noisy signal at the end of each period on the sender’s ex-ante private information. We compare our model of long-run persuasion to the persuasion baseline of committed persuasion, where the sender can commit to strategies at the stage game. Long-run persuasion can only achieve the optimal committed persuasion payoffs if the optimal committed persuasion strategy is “honest”. When the optimal committed strategy is not honest the use of either a weak communication mechanism called a ‘Coin and Cup’ (CnC) or a standard communication mechanism (a mediator) expands the Pareto frontier of the game. For sufficiently patient senders, a CnC mechanism replicates committed persuasion payoffs when the sender’s information is perfectly observed ex-post, whereas a mediator can get arbitrarily close whenever systematic deviation from truth telling is asymptotically identified. The advantage of the CnC over the mediator is that it is relatively easy to manufacture and implement. Finally, we show how ‘emergent communication mechanisms’ arise when there are many simultaneous receivers.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: https://www.nuffield.ox.ac.uk/economics/papers/2016/BestQuigley_persuasion_longrun_30_01_2017.pdf
    Download Restriction: no

    Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2016-W12.

    as
    in new window

    Length: 58 pages
    Date of creation: 09 Dec 2016
    Handle: RePEc:nuf:econwp:1612
    Contact details of provider: Web page: https://www.nuffield.ox.ac.uk/economics/

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Lin, Hsiou-wei & McNichols, Maureen F., 1998. "Underwriting relationships, analysts' earnings forecasts and investment recommendations," Journal of Accounting and Economics, Elsevier, vol. 25(1), pages 101-127, February.
    2. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
    3. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-465, Autumn.
    4. Renault, Jérôme & Solan, Eilon & Vieille, Nicolas, 2013. "Dynamic sender–receiver games," Journal of Economic Theory, Elsevier, vol. 148(2), pages 502-534.
    5. Susan Athey & Kyle Bagwell, 2008. "Collusion With Persistent Cost Shocks," Econometrica, Econometric Society, vol. 76(3), pages 493-540, May.
    6. Luis Rayo & Ilya Segal, 2010. "Optimal Information Disclosure," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 949-987.
    7. Archishman Chakraborty & Rick Harbaugh, 2010. "Persuasion by Cheap Talk," American Economic Review, American Economic Association, vol. 100(5), pages 2361-2382, December.
      • Archishman Chakraborty & Rick Harbaugh, 2006. "Persuasion by Cheap Talk," Working Papers 2006-10, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy, revised Oct 2009.
    8. Ilan Kremer & Yishay Mansour & Motty Perry, 2014. "Implementing the "Wisdom of the Crowd"," Journal of Political Economy, University of Chicago Press, vol. 122(5), pages 988-1012.
    9. Hermalin, Benjamin E., 2007. "Leading for the long term," Journal of Economic Behavior & Organization, Elsevier, vol. 62(1), pages 1-19, January.
    10. Radner, Roy, 1985. "Repeated Principal-Agent Games with Discounting," Econometrica, Econometric Society, vol. 53(5), pages 1173-1198, September.
    11. Kolotilin, Anton, 2015. "Experimental design to persuade," Games and Economic Behavior, Elsevier, vol. 90(C), pages 215-226.
    12. Juan F. Escobar & Juuso Toikka, 2013. "Efficiency in Games With Markovian Private Information," Econometrica, Econometric Society, vol. 81(5), pages 1887-1934, September.
    13. Ohad Kadan & Leonardo Madureira & Rong Wang & Tzachi Zach, 2009. "Conflicts of Interest and Stock Recommendations: The Effects of the Global Settlement and Related Regulations," Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4189-4217, October.
    14. Barber, Brad M. & Lehavy, Reuven & McNichols, Maureen & Trueman, Brett, 2006. "Buys, holds, and sells: The distribution of investment banks' stock ratings and the implications for the profitability of analysts' recommendations," Journal of Accounting and Economics, Elsevier, vol. 41(1-2), pages 87-117, April.
    15. Michaely, Roni & Womack, Kent L, 1999. "Conflict of Interest and the Credibility of Underwriter Analyst Recommendations," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 653-686.
    16. Eduardo Perez-Richet, 2014. "Interim Bayesian Persuasion: First Steps," American Economic Review, American Economic Association, vol. 104(5), pages 469-474, May.
    17. Taneva, Ina A, 2015. "Information Design," SIRE Discussion Papers 2015-50, Scottish Institute for Research in Economics (SIRE).
    18. Barron, Daniel, 2017. "Attaining efficiency with imperfect public monitoring and one-sided Markov adverse selection," Theoretical Economics, Econometric Society, vol. 12(3), September.
    19. Harrison Hong & Jeffrey D. Kubik, 2003. "Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts," Journal of Finance, American Finance Association, vol. 58(1), pages 313-351, February.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nuf:econwp:1612. 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: (Maxine Collett)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.