Money Burning Improves Mediated Communication

Yi Liu and Yang Yu

Papers from arXiv.org

Abstract: This paper explores the problem of mediated communication enhanced by money-burning tactics for commitment power. In our model, the sender has state-independent preferences and can design a communication mechanism that both transmits messages and burns money. We characterize the sender's maximum equilibrium payoff, which has clear geometric interpretations and is linked to two types of robust Bayesian persuasion. We demonstrate that, generically, the money-burning tactic \emph{strictly} improves the sender's payoff for almost all prior beliefs where commitment is valuable for the sender. Furthermore, our communication model directly applies to Web 3.0 communities, clarifying the commitment value within these contexts.

Date: 2024-11
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
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