Costly Persuasion

We study the design of informational environments in settings where generating information is costly. We assume that the cost of a signal is proportional to the expected reduction in uncertainty. We show that Kamenica & Gentzkow's (2011) concavification approach to characterizing optimal si...

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Bibliographic Details
Published in:The American economic review 2014-05, Vol.104 (5), p.457-462
Main Authors: Gentzkow, Matthew, Kamenica, Emir
Format: Article
Language:English
Subjects:
Cardinality
Cost functions
Costs
Design
Economic information
Economic theory
Entropy
Equilibrium
Guilty verdicts
Implicit costs
Information
Organizational communication
Persuasion
Prosecuting attorneys
Reductionism
Return on investment
Signals
Studies
THEORY OF PERSUASION
Uncertainty
Utility functions
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Summary:We study the design of informational environments in settings where generating information is costly. We assume that the cost of a signal is proportional to the expected reduction in uncertainty. We show that Kamenica & Gentzkow's (2011) concavification approach to characterizing optimal signals extends to these settings.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.104.5.457