Events

(joint with Gilat Levy and Ronny Razin)

We consider an information design problem in which a sender tries to persuade a receiver that has "correlation neglect", i.e., fails to understand that signals might be correlated. We provide a graphical characterisation of the feasible information structures with a finite number of signals. The characterisation shows that while it is always feasible to fully positively correlate signals, negative correlation imposes restrictions on what the sender can do. Still, we show that sometimes the optimal strategy for the sender will involve negative correlation. In an application to correlation across media outlets, we show that a media owner will fully correlate signals when the prior is against her interests, and will use negative correlation between outlets when the prior is in her favour. We also show that when a sender has a large number of signals, she can achieve her first best even when her utility is state-dependent.

The Economic Theory Lunchtime Workshops are convened by Meg Meyer.