Publisher:
Université du Québec à Montréal, École des sciences de la gestion (ESG UQAM), Département des sciences économiques, Montréal
Abstract:
We study a sender's optimal choice of precision when he selects from a class of random signals to persuade a receiver to accept his request, with higher costs associated with higher precision. The receiver observes both the precision and a random realization of the signal. We characterize plausible equilibria under discretion, where the sender privately observes favourable or unfavourable information before choosing precision. In addition, we characterize the optimal choice of precision under commitment, where he chooses it before observing his private information. We then analyze optimal persuasion by comparing the sender's payoff from discretion and that from commitement. We demonstrate that as the prior becomes more pessimistic, the sender is more likely to prefer discretion to commitment.