Optimal Reporting When Additional Information Might Arrive
62 Pages Posted: 30 Sep 2015 Last revised: 24 Feb 2017
Date Written: February 21, 2017
We study a persuasion model in which a sender not only chooses a reporting system to influence a receiver’s beliefs, but also may subsequently receive private information and exercise discretion over its disclosure. We identify conditions under which (i) higher-quality private information may induce more or less informative reporting systems, (ii) an option to withhold private information is or is not valuable to the sender, and (iii) the sender and the receiver have aligned or misaligned preferences regarding the receipt of private information or the discretion over its disclosure. Our results are robust to limited ex post manipulation of report realizations. We consider applications to various settings including initial public offerings of securities, issuer-pay bond ratings, FDA drug approval processes, and professional rules of conduct for prosecutors in criminal actions.
Keywords: Bayesian persuasion, disclosure of private information, verifiable messages, commitment
JEL Classification: D82, M40, M41
Suggested Citation: Suggested Citation