Persuasion Under Higher-Order Uncertainty

56 Pages Posted: 5 Sep 2015

See all articles by Patrick Hummel

Patrick Hummel

Google Inc.

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group

Phillip C. Stocken

Dartmouth College - Tuck School of Business

Date Written: September 2, 2015

Abstract

We study a general model of persuasion games under higher-order uncertainty about the sender's knowledge of an uncertain state variable. Unlike situations where such uncertainty is absent, we show that higher-order uncertainty eliminates truth-telling as an equilibrium. Instead, equilibrium consists of a convex interval of states where either disclosure or complete non-disclosure occurs, depending on the relative slopes of the ideal action lines of the sender and receiver. When choosing between senders differing in both expertise and preference alignment, we offer conditions where expertise dominates regardless of the degree of preference misalignment. Absent higher-order uncertainty, we provide an algorithm for constructing a truthful equilibrium, as well as necessary and sufficient conditions for equilibrium uniqueness.

Keywords: High-order uncertainty, persuasion, cheap talk, truth-telling, unraveling, full revelation

JEL Classification: C72, D80, D83

Suggested Citation

Hummel, Patrick and Morgan, John and Stocken, Phillip C., Persuasion Under Higher-Order Uncertainty (September 2, 2015). Tuck School of Business Working Paper No. 2656144. Available at SSRN: https://ssrn.com/abstract=2656144 or http://dx.doi.org/10.2139/ssrn.2656144

Patrick Hummel

Google Inc. ( email )

1600 Amphitheatre Parkway
Second Floor
Mountain View, CA 94043
United States

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States
510-642-2669 (Phone)
810-885-5959 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/rjmorgan/

Phillip C. Stocken (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States
603-646-2843 (Phone)

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