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Persuasion and Welfare

Author

Listed:
  • Laura Doval

    (Columbia University [New York], CEPR - Center for Economic Policy Research)

  • Alexey Smolin

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPR - Center for Economic Policy Research)

Abstract

Information policies such as scores, ratings, and recommendations are increasingly shaping society's choices in high-stakes domains. We provide a framework to study the welfare implications of information policies on a population of heterogeneous individuals. We define and characterize the Bayes welfare set, consisting of the population's utility profiles that are feasible under some information policy. The Pareto frontier of this set can be recovered by a series of standard Bayesian persuasion problems. We provide necessary and sufficient conditions under which an information policy exists that Pareto dominates the no-information policy. We illustrate our results with applications to data leakage, price discrimination, and credit ratings.

Suggested Citation

  • Laura Doval & Alexey Smolin, 2024. "Persuasion and Welfare," Post-Print hal-04865537, HAL.
    • Handle: RePEc:hal:journl:hal-04865537
    DOI: 10.1086/729067
    as

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