Information Design in Games: Certification Approach

Alex Smolin and Takuro Yamashita

No 18282, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Several players participate in a game with a continuum of actions. A designer chooses an information structure - a joint distribution of a state and private signals - and evaluates it according to the expected designer's payoff in the induced Bayes Nash equilibrium. We show an information structure is designer-optimal whenever the equilibrium play it induces can also be induced in an auxiliary contracting problem. This finding gives rise to a tractable solution method, which we use to study two novel applications. In an investment game, an optimal structure fully informs a single investor while providing no information to others. This structure is robustly optimal, for any state distribution and number of investors. In a price competition game, an optimal structure is Gaussian and recommends prices linearly in the state. This structure is uniquely optimal.

Keywords: Bayesian; persuasion (search for similar items in EconPapers)
Date: 2023-07
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