Persuading crowds

Caio Lorecchio

No 2022/434, UB School of Economics Working Papers from University of Barcelona School of Economics

Abstract: A sequence of short-lived agents must choose which action to take under a fixed, but unknown, state of the world. Prior to the realization of the state, the long-lived principal designs and commits to a dynamic information policy to persuade agents toward his most preferred action. The principal's persuasion power is potentially limited by the existence of conditionally independent and identically distributed private signals for the agents as well as their ability to observe the history of past actions. I characterize the problem for the principal in terms of a dynamic belief manipulation mechanism and analyze its implications for social learning. For a class of private information structure - the log-concave class, I derive conditions under which the principal should encourage some social learning and when he should induce herd behavior from the start (single disclosure). I also show that social learning is less valuable to a more patient principal: as his discount factor converges to one, the value of any optimal policy converges to the value of the single disclosure policy.

Keywords: Observational learning; Bayesian persuasion; dynamic information design. (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2022
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
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