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Persuasion in an asymmetric information economy: a justification of Wald’s maxmin preferences

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Abstract

To justify the use of Wald’s maxmin preferences in an asymmetric information economy, we introduce a mechanism designer who can convince/persuade agents to adopt Wald’s maxmin preferences. We show that more efficient and individually rational allocations become incentive compatible if the mechanism designer persuades agents to use Wald’s maxmin preferences instead of Bayesian preferences. Thus, we justify the Wald’s maxmin preferences by showing that agents can be persuaded to use them in order to enlarge the set of efficient, individually rational and incentive compatible allocations.

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Authors and Affiliations

  1. International School of Economics and Management, Capital University of Economics and Business, Beijing, China

    Zhiwei Liu

  2. Department of Economics, Henry B. Tippie College of Business, The University of Iowa, 108 John Pappajohn Business Building, Iowa City, IA, 52242-1994, USA

    Nicholas C. Yannelis

Authors
  1. Zhiwei Liu
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  2. Nicholas C. Yannelis
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Correspondence to Zhiwei Liu.

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We thank Andy Zapechelnyuk, Joel Sobel, Bart Taub, Sayre P. Satterwhite and two referees and the participants at “Seminar Series on Communication and Persuasion” for helpful comments, discussions and suggestions. Zhiwei Liu gratefully acknowledges the financial support from the National Natural Science Foundation of China (Grant No. 71703110).

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Liu, Z., Yannelis, N.C. Persuasion in an asymmetric information economy: a justification of Wald’s maxmin preferences. Econ Theory 72, 801–833 (2021). https://doi.org/10.1007/s00199-021-01364-7

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  • DOI: https://doi.org/10.1007/s00199-021-01364-7

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