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Ambiguous Persuasion under Dynamic Consistency

Xiaoyu Cheng

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Abstract: In a persuasion game, if both the sender and receiver are ambiguity averse, can the sender benefit from sending ambiguous messages? This paper shows that the sender cannot benefit from introducing ambiguity if the receiver is dynamically consistent. This result is obtained when both players' preferences are represented by the Maxmin Expected Utility (MEU) criterion. However, if the sender is strictly less ambiguity averse than the receiver (in the sense of alpha-MEU), then she may benefit even when facing a dynamically consistent receiver. This gain comes from extracting an \textit{ambiguity premium} by exploiting the differences in the ambiguity attitudes.

Date: 2020-10, Revised 2021-07
New Economics Papers: this item is included in nep-gth and nep-mic
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