DP15709 Information Design by an Informed Designer

Author(s): Frederic Koessler, Vasiliki Skreta
Publication Date: January 2021
Keyword(s): Bayesian persuasion, core mechanism, Informed principal, interim information design, neutral optimum, strong-neologism proofness, verifiable types
JEL(s): C72, D82
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15709

A designer is privately informed about the state and chooses an information disclosure mechanism to influence the decisions of multiple agents playing a game. We define an intuitive class of incentive compatible information disclosure mechanisms which we coin interim optimal mechanisms. We prove that an interim optimal mechanism exists, and that it is an equilibrium outcome of the interim information design game. An ex-ante optimal mechanism may not be interim optimal, but it is whenever it is ex-post optimal. In addition, in leading settings in which action sets are binary, every ex-ante optimal mechanism is interim optimal. We relate interim optimal mechanisms to other solutions of informed principal problems.