Journal of Political Economy Vol. 118 No. 5 2010
Optimal Information Disclosure
Abstract
A sender randomly draws a “prospect” characterized by its profitability to the sender and its relevance to a receiver. The receiver observes only a signal provided by the sender and accepts the prospect if his Bayesian inference about the prospect’s relevance exceeds his opportunity cost. The sender’s profits are typically maximized by partial information disclosure, whereby the receiver is induced to accept less relevant but more profitable prospects (“switches”) by pooling them with more relevant but less profitable ones (“baits”). Extensions include maximizing a weighted sum of sender profits and receiver surplus and allowing the sender to use monetary incentives.
- DOI
- 10.1086/657922
- Volume
- 118
- Issue
- 5
- Pages
- 949-987
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref