Bayesian Persuasion and Information Design

By Emir Kamenica. Annual Review of Economics, 2019

393 citations recorded by the source corpus.

A school may improve its students’ job outcomes if it issues only coarse grades. Google can reduce congestion on roads by giving drivers noisy information about the state of traffic. A social planner might raise everyone's welfare by providing only partial information about solvency of banks. All of this can happen even when everyone is fully rational and understands the data-generating process. Each of these examples raises questions of what is the (socially or privately) optimal information that should be revealed. In this article, I review the literature that answers such questions.

Subfields: Management Science and Operations Research, Marketing

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