Theoretical Foundations and Design of Persuasion Mechanisms

Lead Research Organisation: University of St Andrews
Department Name: Economics and Finance

Abstract

The proposed research studies the problem of persuasion. In this problem, a persuader has a substantial degree of control over information to be acquired and selectively disclosed, which can be used to manipulate a listener's beliefs and actions.

There are two broad questions to be addressed. One is the question of optimal persuasion design, a selective disclosure of information that maximizes the chance to persuade the listener. For example, suppose that a government would like to persuade the public to reduce the amount of public smoking by commissioning an educational campaign about the health risks of cigarettes. What is the optimal way to conduct the educational campaign? Should the government target different consumer groups by providing them with different information or is it efficient to provide the same information to everyone? When should the government withhold information from the public? How should the distribution of tastes among the consumers affect the optimal amount of information released by the government?

The second question is about protection of individuals from detrimental manipulation by a persuader. What are the factors that affect a listener's vulnerability to being persuaded and manipulated, and what can be done to reduce this vulnerability? What are the roles of individual privacy, diversity of individual tastes and opinions, and information transparency in organisations?

There is vast scope for potential impact of the proposed research project. Areas of impact include (but not limited to) optimal certification policies of financial and consumer products; public education campaigns; media censorship regulations; commercial advertising regulations (e.g., in pharmaceutical industry); privacy protection in social networks and internet trading portals; informational lobbying (e.g., a lobbying group commissions a study with the goal of influencing a politician's decision about adoption of a policy); persuasion issues in the design of experiments in social sciences.

The economics of persuasion, dwelling upon microeconomics and information theory, was pioneered by Rayo and Segal (Journal of Political Economy, 2010) and Kamenica and Gentzkow (American Economic Review, 2011). Despite the apparent power and generality of this theoretical framework, concrete insights into real-world persuasion mechanisms have so far been lacking (DellaVigna and Gentzkow (Annual Review of Economics, 2010) report evidence on systematic departures from existing theoretical models). One key roadblock is that existing theoretical methods are relatively intractable, and thus can only be usefully applied in very limited and specific settings. In particular, three important classes of economic settings that the current approaches can't handle:
- persuasion of an audience of diverse listeners with privately known preferences or interests;
- imperfect knowledge or (partial) misunderstanding of a persuasion mechanism by listeners;
- a prior informational advantage of a persuader (before a persuasion mechanism is chosen), so called "informed principal" problem in the persuasion context.

The proposed research project will apply the tools from mechanism design in novel ways to the persuasion problem. These tools will enable tractable analysis of the persuasion problem in each of the three settings described above. The proposed research project will build a comprehensive theoretical framework that incorporates the above scenarios and, hence, will be able to provide practically relevant guidance to policy makers, legislators, and human rights and consumer protection organizations.

Planned Impact

Non-academic beneficiaries from the proposed research are divided into two groups.

The first group of users will benefit from our recommendations and guidelines for the efficient design of persuasion mechanisms. Practically the recommendations will come in the form of advice regarding laws and regulations on information disclosure that facilitate desirable actions of a target audience. Campaign Resource Centre (the UK Department of Health) will be interested in recommendations about educational campaigns of vaccination, smoking, obesity, exercise, etc. VoxUkraine, an influential non-government organisation that conducts independent research-based policy analysis by leading scholars, policymakers and businessmen in Ukraine, has agreed to contribute to this research project by providing feedback and participating in steering group meetings. Particular issues that we can help to address are:
- How should public educational campaigns be designed to encourage people to make informed health decisions about vaccination, diet, exercise, etc?
- How should the government motivate people to acquire information about political issues and candidates, and thus produce informed voting outcomes?
- How should laws be designed to prevent rogue administrations from abusing their control of the media?
- How should financial regulations be designed to encourage accounting firms and financial institutions to disclose relevant financial information to the public?

The second group of beneficiaries includes consumer protection organisations, such as Citizens Advice, Citizens Advice Scotland and the Consumer Council for Northern Ireland, as well as organisations acting in the public interest that tackle the problems of transparency of authorities and protection of individual privacy, such as the Information Commissioner's Office in the UK, Privacy International, Human Rights Watch, Amnesty International, etc. Particular issues that we can help to address are:
- What are the reasons that cause an individual to be vulnerable to persuasion and manipulation?
- What are efficient methods to address this problem? What are the points of impact in the legislature that have to be altered? What public institutions should be created or improved?

This project will produce theoretical insights and practical prescriptions for these and related questions, which have can have social, political and economic implications at home and abroad. This can be of particular importance for developing countries, where the PI (Andriy Zapechelnyuk) and his academic collaborator, Tymofiy Mylovanov, have a record of contribution beyond the academic sphere. The PI have completed the grant project on modelling of the electricity market in Ukraine (IDRC grant, CRED project no. 104241); Tymofiy Mylovanov is an editor of VoxUkraine, and (together with Roger Myerson, who won the Nobel prize for his contributions to mechanism design) he has been leading an initiative to reform the Ukrainian constitution, with the goal of decentralizing the distribution of political power in Ukraine (see, for e

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