Persuasion, Spillovers, and Government Interventions

Cheng Li and Yancheng Xiao

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a model of Bayesian persuasion with spillovers to investigate the impact of information production on optimal policy design. A sender produces information to persuade a receiver to take an action with external effects, and the government implements corrective subsidies and taxes to maximize social welfare. Subsidies to the sender’s preferred action incentivize her to produce less information, while taxes motivating her to produce more. Such an informational effect impacts the receiver’s decision and social welfare. We show that the optimal corrective subsidies and taxes may be different from the Pigouvian level. Most notably, the optimal policy is no government intervention when the spillover is positive and small.

Keywords: persuasion; spillover effects; externalities; Pigouvian taxes; subsidies; social welfare (search for similar items in EconPapers)
JEL-codes: C72 D8 H21 H23 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-gth, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:103500

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