Monday, November 17, 2014 | 12:30pm – 2:00pm | Room 335, HSBC Business School Building

Abstract

This paper investigates the role of persuasion mechanisms in collective decision-making with heterogeneous preferences. A persuasion mechanism consists of a family of conditional distributions over the underlying state space and the noisy signal realizations. A biased sender adopts a persuasion mechanism to provide a committee of uninformed receivers with signals about the unknown state of the world. We compare public persuasion with private persuasion. We find that the sender can always reach the concave closure of the set of possible expected payoffs under public persuasion, regardless of the number of generated signals. The sender is worse off under private persuasion when receivers in the committee vote strategically. We also show that private persuasion is at least as informative as its public counterpart. As a result, the receivers make weakly better decisions under private persuasion. Moreover, voting fully aggregate the receivers' private information in the state where the sender and the receivers' preferences are perfectly aligned; while full information aggregation may fail in other states.