Persuasion Under Costly Learning
26 Pages Posted: 12 Jun 2018 Last revised: 18 Nov 2020
Date Written: October 10, 2020
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: Suggested Citation