Persuasion and Welfare

Laura Doval and Alex Smolin

Journal of Political Economy, 2024, vol. 132, issue 7, 2451 - 2487

Abstract: Information policies such as scores, ratings, and recommendations are increasingly shaping society’s choices in high-stakes domains. We provide a framework to study the welfare implications of information policies on a population of heterogeneous individuals. We define and characterize the Bayes welfare set, consisting of the population’s utility profiles that are feasible under some information policy. The Pareto frontier of this set can be recovered by a series of standard Bayesian persuasion problems. We provide necessary and sufficient conditions under which an information policy exists that Pareto dominates the no-information policy. We illustrate our results with applications to data leakage, price discrimination, and credit ratings.

Date: 2024
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Working Paper: Persuasion and Welfare (2024)
Working Paper: Persuasion and Welfare (2023)
Working Paper: Persuasion and Welfare (2023)
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