69 Pages Posted: 18 Aug 2015 Last revised: 2 Sep 2015
Date Written: August 10, 2015
We present a model of persuasive signalling, where a privately-informed sender selects from a class of signals with different precision to persuade a receiver to take one of two actions. The sender’s information could be either favourable or unfavourable. The receiver observes both the sender’s choice of signal and a random realization of the signal. We characterize the set of D1 equilibria. We show that all of them must involve some pooling and any informative signal must be associated with an optimistic posterior. When the receiver is ex ante skeptical or indifferent, there is a unique D1 equilibrium, which is semi-separating and where the levels of precision are independent of the prior. Finally, we investigate the sender’s optimal persuasion policy – choice of signal before (commitment) or after (discretion) he learns his type. We show that the sender is indifferent between the commitment and discretion when the prior is optimistic, prefers discretion to commitment when the prior is sufficiently pessimistic, and could either prefer discretion or commitment when the prior is neutral.
Keywords: signalling, persuasion, divine equilibrium, optimal information provision
JEL Classification: D72, D82
Suggested Citation: Suggested Citation