Bayesian Persuasion and Information Design

Emir Kamenica

Annual Review of Economics, 2019, vol. 11, issue 1, 249-272

Abstract: A school may improve its students’ job outcomes if it issues only coarse grades. Google can reduce congestion on roads by giving drivers noisy information about the state of traffic. A social planner might raise everyone's welfare by providing only partial information about solvency of banks. All of this can happen even when everyone is fully rational and understands the data-generating process. Each of these examples raises questions of what is the (socially or privately) optimal information that should be revealed. In this article, I review the literature that answers such questions.

Date: 2019
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DOI: 10.1146/annurev-economics-080218-025739

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