This award funds research in economic theory. The research team seeks to use tools from game theory to model and analyze situations in which persuasion, credibility, and information design are important. In many different kinds of economic (and social) interactions, one or more parties provides information to others, but also has an interest in the outcome. For example, a firm marketing a new product provides information about the product's features and benefits to possible buyers, but obviously the firm also wants to make the sale. In these kinds of situations, careful buyers will consider not just the information provided but also the source before deciding what to believe and what conclusions to draw. The two investigators plan to develop a framework that could be used to analyze these kinds of credibility and persuasion issues across a broad class of applications. This has the potential for suggesting practical methods that business, governments, and individuals can use to credibly transmit information.
The research is aimed at understanding credibility's role in optimal persuasion. The team will analyze three connected environments with varying degrees of credibility. The first part focuses on studying the limits of cheap talk persuasion. The researchers build and analyze a general model in which an informed sender communicates with a receiver at no cost. The model assumes that the sender's preferences over the receiver's actions are state-independent, and this assumption allows for a geometric characterization of the model equilibria. The second project focuses on the effect of intermediate credibility in persuasion by allowing for a messaging protocol. Since credibility enables effective persuasion, there is a tradeoff between today's effective communication and tomorrow's persuasion. The last part of this research considers how concern for future credibility affects ongoing persuasion.
