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Persuasion in an asymmetric information economy: a justification of Wald’s maxmin preferences

Zhiwei Liu () and Nicholas C. Yannelis ()
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Zhiwei Liu: Capital University of Economics and Business
Nicholas C. Yannelis: The University of Iowa

Economic Theory, 2021, vol. 72, issue 3, No 7, 833 pages

Abstract: Abstract To justify the use of Wald’s maxmin preferences in an asymmetric information economy, we introduce a mechanism designer who can convince/persuade agents to adopt Wald’s maxmin preferences. We show that more efficient and individually rational allocations become incentive compatible if the mechanism designer persuades agents to use Wald’s maxmin preferences instead of Bayesian preferences. Thus, we justify the Wald’s maxmin preferences by showing that agents can be persuaded to use them in order to enlarge the set of efficient, individually rational and incentive compatible allocations.

Keywords: Persuasion; Efficient; Individually rational; Incentive compatibility; Wald’s maxmin preferences (search for similar items in EconPapers)
JEL-codes: D51 D81 D82 D83 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00199-021-01364-7

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