Persuasion with Rational Inattention
71 Pages Posted: 17 Apr 2018 Last revised: 22 Jun 2018
Date Written: April 16, 2018
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: Suggested Citation