Thursday, January 23, 2020 at 11:40am to 1:10pm
Ives Hall, 115
B07 Tower Rd, Ithaca, NY 14853, USA
Svetlana Kosterina - Princeton University
Persuasion with Unknown Beliefs
Abstract: A sender designs a signal structure to persuade a receiver to take an action. The sender is ignorant about the receiver's prior, and evaluates each signal structure using the receiver's prior that is the worst for the sender. I characterize the optimal signal structures in this environment. I show that there exists an optimal signal with two realizations, characterize the support of the signal and provide a formula that the signal must satisfy on the support, showing that the optimal signal is a hyperbola. The lack of knowledge of the receiver's prior causes the sender to hedge her bets: the optimal signal induces the high action in more states than in the standard model, albeit with a lower probability. I show that increasing the sender's ignorance can hurt both the sender and the receiver. If the sender is maximally ignorant about the receiver's prior on the states where the sender and the receiver disagree, then the optimal signal is continuous in the state and recommends the high action with a strictly positive probability in all states.