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Disclosure to a Psychological Audience

Author

Listed:
  • Elliot Lipnowski
  • Laurent Mathevet

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.

Suggested Citation

  • Elliot Lipnowski & Laurent Mathevet, 2018. "Disclosure to a Psychological Audience," American Economic Journal: Microeconomics, American Economic Association, vol. 10(4), pages 67-93, November.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:4:p:67-93
    Note: DOI: 10.1257/mic.20160247
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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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