Shaofei Jiang (University of Bonn) 12.10.2022

I study a model of costly Bayesian persuasion by a privately and partially informed sender who conducts a public experiment. I microfound the cost of an experiment via a Wald's sequential sampling problem and show that it equals the expected reduction in a weighted log-likelihood ratio function evaluated at the sender's belief. I focus on equilibria that satisfy the D1 criterion. The equilibrium outcome depends on the relative costs of drawing good and bad news in the experiment. If bad news is more costly, there exists a unique separating equilibrium outcome, and the receiver unambiguously benefits from the sender's private information. If good news is sufficiently more costly, the single-crossing property fails. There exists a continuum of pooling equilibria, and the receiver strictly suffers from sender private information in some pooling equilibria.