Information dissemination with bounded rationality and channel complexity – StratCom

Information asymmetries pervade economic contexts. Job applicants know their ability better than employers, entrepreneurs have more information about their projects than banks, lobbyists are better informed about the scientific consensus around their issues than politicians, food producers understand the nutritional content of their products better than consumers. Our research plan is concerned with whether and how interested parties (employees, entrepreneurs, lobbyists, producers) communicate their private information to decision makers (employers, banks, politicians, consumers). The proposal involves various and complementary projects involving approaches from game-theory, behavioral economics and industrial organization. All projects, described below, aim at studying the role of bounded rationality and complex communication channels on the dissemination of information to decision-makers and in markets.

1. Information disclosure and the protection of naive consumers. We will study theoretically and experimentally disclosure games in which firms not only decide whether to disclose verifiable information, but also enjoy substantial flexibility in how information is disclosed to unsophisticated consumers. We will also consider disclosure games in which firms have multiple noisy signals about the quality of their products and can shape their disclosure strategies as a function of consumers' naivete.

2. Bounded rationality and psychological preferences in communication games. We will develop sender-receiver communication models in which the beliefs of the decision-maker directly enter his utility function. In this new theoretical framework, we will study the robustness of the unravelling result in voluntary disclosure games. We will also incorporate psychological preferences into cheap talk games and study the value of mediation and advice.

3. Credibility of Online Information. We will analyze the credibility of online product information. Our goal is to understand how the internet platform business model modifies the strategic disclosure of product information with a particular emphasis on the role of consumers as transmitters and acquirers of such information.

4. Dynamic and competitive information design. We will analyze long and competitive information design games between multiple information designers who want to influence the final action of a decision-maker. In particular, we will study how information designers react dynamically to the information policies of their competitors.

The new models and results obtained in these projects will answer a number of questions: When is information credibly revealed to decision-makers? What is the quality of information that is produced and revealed by interested parties? How does a decision-maker's sophistication and preference affect strategic information revelation and efficiency? How does the vagueness of informed parties' disclosure impact on the decisions of naive decision-makers? What is the role of communication intermediaries to advise boundedly-rational decision-makers? As a next step, we will test some of our models' positive predictions in innovative laboratory experiments. Ultimately, our research promises to result in a better understanding of the role that policies, such as mandatory disclosure laws, mediation, third-party certification and consumer education, can play in improving information transmission and decisions.



Keywords. Advertising; Bayesian persuasion; behavioral economics; bounded rationality; certification; cheap talk; concavification; consumers protection; credible communication; experimental economics; giving advice; information avoidance; information unravelling; information design; intermediaries; mediation; mandatory versus voluntary disclosure; noisy information; platforms; product information disclosure; psychological games; revelation principle; search goods; splitting games; statistical experiments; stochastic games.