The Design and Price of Influence

TL;DR

This paper analyzes how a monopolist intermediary designs and prices statistical tests to influence a receiver's decision, revealing how distortions in test design can sometimes benefit the sender and exploring different intermediary power scenarios.

Contribution

It characterizes the optimal screening menu and distortions in test design by a monopolist intermediary, highlighting effects on information informativeness and sender benefits.

Findings

Optimal screening menu characterized

Test design distortions can benefit the sender

Different intermediary power scenarios analyzed

Abstract

A sender with private preferences would like to influence a receiver's action by providing information through a statistical test. The technology for information production is controlled by a monopolist intermediary, who offers a menu of tests and prices to screen the sender's type. We characterize the intermediary's optimal screening menu and the associated distortions, which may benefit the receiver by increasing test informativeness. Because of these distortions, seemingly unfavorable changes in the prior belief may actually benefit the sender. In extensions, we study (i) a stronger intermediary who can commit to a ``coercive'' test to punish non-participation and (ii) a weaker intermediary who cannot control test design but can charge for access.