Disclosure to a psychological audience

Elliot Lipnowski, Laurent Mathevet

    Research output: Contribution to journalArticlepeer-review

    Abstract

    We study how a benevolent expert should disclose information to an agent with psychological concerns. We first provide a method to compute an optimal information policy for many psychological traits. The method suggests, for instance, that an agent suffering from temptation à la Gul and Pesendorfer (2001) should not know what he is missing, thereby explaining observed biases as an optimal reaction to costly self-control. We also show that simply recommending actions is optimal when the agent is intrinsically averse to information but has instrumental uses for it. This result, which circumvents the failure of the Revelation Principle in psychological environments, simplifies disclosure and informs the debate regarding mandated disclosure.

    Original languageEnglish (US)
    Pages (from-to)67-93
    Number of pages27
    JournalAmerican Economic Journal: Microeconomics
    Volume10
    Issue number4
    DOIs
    StatePublished - Nov 1 2018

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

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