Persuasion Under Costly Learning

26 Pages Posted: 12 Jun 2018 Last revised: 18 Nov 2020

See all articles by Dong Wei

Dong Wei

University of California, Berkeley - Department of Economics

Date Written: October 10, 2020

Abstract

A Sender (seller) tries to persuade a rationally inattentive Receiver (buyer) to take a particular action (e.g., buying). Learning is costly for the Receiver who can choose to process strictly less information than what the sender provides. In a binary-action binary-state model, we show that optimal disclosure involves information distortion, but to a lesser extent than the case without learning costs; meanwhile, the Receiver processes less information than what he would under full disclosure. We also find that the Receiver can leverage his potential inattention to attain a higher equilibrium payoff than the perfectly attentive case. While the Sender is always worse off when facing a less attentive Receiver, the amount of information processed in equilibrium varies with learning costs in a non-monotone fashion.

Keywords: persuasion, rational inattention, costly information processing, information design

JEL Classification: D82, D83, D91

Suggested Citation

Wei, Dong, Persuasion Under Costly Learning (October 10, 2020). Available at SSRN: https://ssrn.com/abstract=3188302 or http://dx.doi.org/10.2139/ssrn.3188302

Dong Wei (Contact Author)

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

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