DP13441 Strategic Interpretations

Author(s): Kfir Eliaz, Ran Spiegler, Heidi Christina Thysen
Publication Date: January 2019
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13441

We study strategic communication when the sender can influence the receiver's understanding of messages' equilibrium meaning. We focus on a "pure persuasion" setting, in which the informed sender wants the uninformed receiver to always choose "accept". The sender's strategy maps each state of Nature to a distribution over pairs consisting of: (i) a multi-dimensional message, and (ii) a "dictionary" that credibly discloses the state-dependent distribution of some of the messsage's components. The receiver does not know the sender's strategy by default; he can only interpret message components that are covered by the dictionary he is provided with. We characterize the sender's optimal persuasion strategy and show that full persuasion is possible when the prior on the acceptance state exceeds a threshold that quickly decreases with message dimensionality. We extend our analysis to situations where interpretation of messages is done by a third party with uncertain preferences, and explore alternative notions of "dictionaries".