The simple economics of optimal persuasion

Piotr Dworczak, Giorgio Martini

Research output: Contribution to journalArticlepeer-review

34 Scopus citations

Abstract

We propose a price-theoretic approach to Bayesian persuasion by establishing an analogy between the sender’s problem and finding Walrasian equilibria of a persuasion economy. The sender, who acts as a consumer, purchases posterior beliefs at their prices using the prior distribution as her endowment. A single firm has the technology to garble the state. Welfare theorems provide a verification tool for optimality of a persuasion scheme and characterize the structure of prices that support the optimal solution. This approach yields a tractable solution method for persuasion problems in which the sender’s utility depends only on the expected state.

Original languageEnglish (US)
Pages (from-to)1993-2048
Number of pages56
JournalJournal of Political Economy
Volume127
Issue number5
DOIs
StatePublished - Oct 1 2019

ASJC Scopus subject areas

  • Economics and Econometrics

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