Endogenous Persuasion with Costly Verification

In this paper, I study a situation in which a sender tries to persuade a receiver with evidence that is generated via public or private experimentation. Under public experimentation, any experimental outcome is revealed, and under private experimentation the sender can hide adverse outcomes. The sen...

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Bibliographic Details
Published in:The Scandinavian journal of economics 2019-07, Vol.121 (3), p.1054-1087
Main Author: Felgenhauer, Mike
Format: Article
Language:English
Subjects:
Communication
Endogenous
Experimentation
Experiments
information acquisition
Information management
Persuasion
Verification
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Summary:In this paper, I study a situation in which a sender tries to persuade a receiver with evidence that is generated via public or private experimentation. Under public experimentation, any experimental outcome is revealed, and under private experimentation the sender can hide adverse outcomes. The sender can design the properties of the experiments. The receiver chooses whether to verify at a cost the design of the experiment with which the revealed outcome was generated. I find that communication breaks down under public experimentation if there is no restriction on the experiment's design, and that persuasion is possible under private experimentation.
ISSN:0347-0520
1467-9442
DOI:10.1111/sjoe.12290