Dynamic Information Design under Constrained Communication Rules
American Economic Journal: Microeconomics
vol. 15,
no. 1, February 2023
(pp. 359-98)
Abstract
An information designer wishes to persuade agents to invest in a project of unknown quality. To do so, she must induce investment and collect feedback from these investments. Motivated by data regulations and simplicity concerns, our designer faces communication constraints. These constraints hinder her without benefiting the agents: they impose an upper bound on the induced belief spread, limiting persuasion. Nevertheless, two-rating systems (direct recommendations) are the optimal design when experimentation is needed to generate information and approximate the designer's first-best payoff for specific feedback structures. When the designer has altruistic motives, constrained rules significantly decrease welfare.Citation
Lorecchio, Caio, and Daniel Monte. 2023. "Dynamic Information Design under Constrained Communication Rules." American Economic Journal: Microeconomics, 15 (1): 359-98. DOI: 10.1257/mic.20200356Additional Materials
JEL Classification
- D64 Altruism; Philanthropy; Intergenerational Transfers
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
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