Informed Information Design

Pre-print, Working paper: 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 mechanisms 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 optimal. 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.

Author(s)

Frédéric Koessler, Vasiliki Skreta

Date of publication
  • 2022
Keywords JEL
C72 D82
Keywords
  • Core mechanism
  • Bayesian persuasion
  • Interim information design
  • Neutral optimum
  • Informed principal
  • Strong-neologism proofness
  • Verifiable types
Internal reference
  • PSE Working Papers n°2021-03
Pages
  • 34 p.
Version
  • 3