Psychological Persuasion
Date: 2015-05-10 9:45 am – 10:15 am
Last modified: 2015-05-04
Abstract
Should a well-intentioned advisor always tell the whole truth? In standard economics, the answer is yes (Blackwell (1953)), but in the world of psychological preferences (Geanakoplos, Pearce, and Stacchetti (1989))—where a listener's state of mind has a direct impact on his well-being—things are not so simple. In this paper, we study how a benevolent principal should disclose information to a psychological agent. After characterizing attitudes toward information, we study optimal information disclosure. Psychological information-aversion is of particular interest. In this case, we show that the principal can simply inform the agent by telling him what to do. Then, we study how the optimal policy changes with information-aversion. We also offer general tools of optimal disclosure. We apply our results to reputational concerns and cognitive dissonance; consumption-saving decisions with temptation problems (Gul and Pesendorfer (2001)); and doctor-patient relationships with equivocal information preferences.