Persuasion with costly precision

Arianna Degan () and Ming Li
Additional contact information
Arianna Degan: Université du Québec à Montréal

Economic Theory, 2021, vol. 72, issue 3, No 9, 869-908

Abstract: Abstract We study a sender’s optimal choice of precision when he selects from a class of random signals to persuade a receiver to accept his request, with higher costs associated with higher precision. The receiver observes both the precision and a random realization of the signal. We consider two situations: commitment, where the sender chooses the precision of his signal before observing any private information; and discretion, where the sender privately observes favourable or unfavourable information before choosing precision. We show that, under commitment, a positive level of precision is possible only when receiver is ex-ante neutral or slightly pessimistic about the sender. Under discretion, as long as the receiver is not convinced ex ante that he should accept the sender, there exists a unique plausible equilibrium, in which each type of sender’s payoff is independent of how pessimistic the receiver is about the sender. We then analyze optimal persuasion by comparing the sender’s payoff from discretion and that from commitment. We demonstrate that the more reluctant the receiver is to accept the sender, the more likely the sender prefers discretion to commitment. Finally, we show that whenever the sender prefers commitment to discretion, the receiver prefers the opposite.

Keywords: Persuasion; Costly signals; Precision; Signalling; D1 equilibrium; Strategic communication; Optimal information provision (search for similar items in EconPapers)
JEL-codes: D72 D82 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://link.springer.com/10.1007/s00199-021-01346-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:72:y:2021:i:3:d:10.1007_s00199-021-01346-9

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-021-01346-9

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().