Persuasion with Rational Inattention

71 Pages Posted: 17 Apr 2018 Last revised: 22 Jun 2018

See all articles by Alexander W. Bloedel

Alexander W. Bloedel

Stanford University - Department of Economics

Ilya R. Segal

Stanford University

Date Written: April 16, 2018

Abstract

We study a model of Bayesian persuasion in which Receiver has limited information-processing capacity, or attention, and must exert costly effort to process Sender’s signals. Receiver is rationally inattentive (Sims (2003)): attention costs are proportional to the mutual information (expected entropy reduction) between Sender’s signals and Receiver’s “perceptions” of them. Information disclosure plays a dual role: in addition to the usual persuasion motive, Sender engages in strategic attention manipulation. When Receiver has a binary action choice, we characterize the optimal persuasion strategy using a first-order approach. At the optimum, “complex” signals are used to exploit Receiver’s limited attention when interests are misaligned, and “simple and convincing” signals are used to focus attention when interests are aligned. When the persuasion motive is absent (preferences are aligned) we trace the attention manipulation motive to the multi-dimensionality of information and the extensive margin of attention allocation: if the state space is binary or Receiver faces a pure capacity constraint, full disclosure is uniquely optimal. Applications include advertising, information management in organizations, design of disclosure regulations, and dual-process theories of attention and choice. We also discuss formal connections to models of (i) persuasion with a privately informed Receiver and (ii) contracting with flexible information acquisition, as well as extensions to cheap talk communication.

Keywords: Bayesian Persuasion, Rational Inattention, Costly Communication, Information Acquisition, Information Design, Monotone Partition, Cheap Talk

JEL Classification: D82, D83, D91

Suggested Citation

Bloedel, Alexander W. and Segal, Ilya, Persuasion with Rational Inattention (April 16, 2018). Available at SSRN: https://ssrn.com/abstract=3164033 or http://dx.doi.org/10.2139/ssrn.3164033

Alexander W. Bloedel (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
STANFORD, CA 94305-6072
United States

Ilya Segal

Stanford University ( email )

Stanford, CA 94305
United States
650-724-4905 (Phone)
650-725-5702 (Fax)

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