Working Paper: CEPR ID: DP17028
Authors: Vasiliki Skreta; Frédéric Koessler
Abstract: 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 interim-optimal mechanisms, a subset of incentive-compatible mechan- isms that are optimal in the sense that the informed designer cannot credibly find an alternative mechanism that strictly improves his interim payoff. We prove that an interim-optimal mechanism exists and that every interim-optimal mechanism is a perfect Bayesian equilibrium outcome of the informed-designer game. An ex- ante optimal mechanism may not be interim optimal, but it is when it is ex-post optimal. Likewise, the unraveling outcome in disclosure games is interim op- timal. We provide a belief-based characterization of interim-optimal mechanisms and compare them with ex-ante optimal ones in common economic environments. In settings with strategic complements and binary actions, every ex-ante optimal mechanism is interim optimal. We compare interim optimality to other solutions of informed-principal problems.
Keywords: interim information design; bayesian persuasion; informed principal; disclosure games; unraveling
JEL Codes: C72; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| designer's choice of mechanism (D47) | agents' beliefs (D83) |
| designer's choice of mechanism (D47) | agents' actions (L85) |
| interim-optimal mechanism (C61) | designer's interim payoff (G35) |
| ex ante optimal mechanism may not be interim optimal (D47) | becomes interim optimal when ex post optimal (C61) |
| unraveling outcome in disclosure games (C72) | interim optimal (C61) |