Bayesian Promised Persuasion: Dynamic Forward-Looking Multiagent Delegation with Informational Burning

TL;DR

This paper introduces Bayesian promised delegation, a dynamic mechanism allowing a principal to persuade privately-informed agents through informational burning, achieving optimal social welfare without monetary transfers in a multiagent setting.

Contribution

It develops a novel randomized mechanism, Bayesian promised delegation, that ensures incentive compatibility via persuasion and promises, fully characterizing belief hierarchies in dynamic Bayesian games.

Findings

BPD achieves the same social welfare as the original mechanism.

The mechanism guarantees periodic incentive compatibility through persuasion.

A revelation principle-like regime fully characterizes the persuasion process.

Abstract

This work studies a dynamic mechanism design problem in which a principal delegates decision makings to a group of privately-informed agents without the monetary transfer or burning. We consider that the principal privately possesses complete knowledge about the state transitions and study how she can use her private observation to support the incentive compatibility of the delegation via informational burning, a process we refer to as the looking-forward persuasion. The delegation mechanism is formulated in which the agents form belief hierarchies due to the persuasion and play a dynamic Bayesian game. We propose a novel randomized mechanism, known as Bayesian promised delegation (BPD), in which the periodic incentive compatibility is guaranteed by persuasions and promises of future delegations. We show that the BPD can achieve the same optimal social welfare as the original mechanism in stationary Markov perfect Bayesian equilibria. A revelation-principle-like design regime is established to show that the persuasion with belief hierarchies can be fully characterized by correlating the randomization of the agents' local BPD mechanisms with the persuasion as a direct recommendation of the future promises.