Dynamic Information Design under Constrained Communication Rules

Author(s)

Lorecchio, Caio ; Monte, Daniel

• Document type: Journal article
• Source: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS; v. 15, n. 1, p. 40-pg., 2023-02-01.

Abstract

An information designer wishes to persuade agents to invest in a project of unknown quality. To do so, she must induce investment and collect feedback from these investments. Motivated by data reg-ulations and simplicity concerns, our designer faces communica-tion constraints. These constraints hinder her without benefiting the agents: they impose an upper bound on the induced belief spread, limiting persuasion. Nevertheless, two-rating systems (direct recom-mendations) are the optimal design when experimentation is needed to generate information and approximate the designer's first-best payoff for specific feedback structures. When the designer has altruistic motives, constrained rules significantly decrease welfare. (AU)

• FAPESP's process: 21/06777-3 - Design of recommender systems with heterogeneous agents
• Grantee: Daniel Monte
• Support Opportunities: Scholarships abroad - Research