Glossary · Game Theory
Bayesian Persuasion
also: information design · persuasion game · strategic disclosure · unraveling · disclosure game
Definition
Bayesian persuasion is the design of an information structure by a sender who commits to a signal before observing the state, in order to move a rational receiver's actions. Kamenica and Gentzkow (2011) characterized the optimum through concavification of the sender's value function. It formalizes when partial disclosure of reviews, ratings, or prices beats full transparency.
The model separates two ideas that everyday talk of persuasion runs together: the sender cannot lie, and the receiver is fully rational, yet the sender still gains by choosing what to reveal. The classic precursor is the unraveling result of Grossman (1981) and Milgrom (1981): when disclosure is costless and verifiable, silence is read as bad news, so every type above the worst discloses and the market reveals everything. Experiments by Jin, Luca, and Martin (2021) found unraveling fails in practice because receivers are insufficiently sceptical of silence, which is exactly the gap a persuader exploits. Review platforms, rating aggregators, drip pricing, and product-comparison pages are all information designs in this sense, and the theory gives a precise account of which of them a rational buyer should distrust.
Essays on this concept
- Game Theory
Bayesian Persuasion and the Economics of Disclosure: Reviews, Ratings, and Price Transparency
Disclosure theory says silence should unravel into full transparency. In practice it does not: buyers under-read silence, so star averages, review order, and hidden fees become information design.
- Game Theory
Advertising as a Costly Signal: Why Expensive Campaigns Persuade Even When They Say Nothing
Much advertising persuades through its cost, not its message. Separating equilibria explain why brand spend that says nothing still moves demand, and why cutting it to fund performance can break the signal.
- Game Theory
Mechanism Design for Marketplaces: Incentive Compatibility as a Product Requirement
Ratings, reviews, rankings, and fees are mechanisms, and users play them. eBay feedback ran 99.3% positive while 3.39% of sales went bad. Incentive compatibility is the test, and it belongs in the spec.
Related concepts
Authoritative references