How to Make an Action Attractive

TL;DR

This paper formalizes a concept of robust paternalism, designing modifications to actions that remain attractive under all beliefs and utility functions, with applications across various economic and political scenarios.

Contribution

It introduces a formal framework for robustly improving actions that are consistently preferred, regardless of beliefs or utility functions, and characterizes these modifications explicitly.

Findings

Characterizes all robustly attractive modifications in terms of state-dependent payoffs.

Provides applications to political competition, trade, insurance, and information acquisition.

Offers a new approach to designing policies that are reliably appealing across uncertainties.

Abstract

A policymaker often wants to steer a decision-maker toward one of two actions, but lacks reliable knowledge of how the decision-maker perceives uncertainty or evaluates risk. We formalize a notion of robust paternalism: a modification a' of a desired action a is robustly more attractive than a relative to b if, for every belief over states and every increasing concave utility function, whenever the decision-maker prefers a to b, she also prefers a' to b. We characterize all such modifications directly in terms of state-dependent payoffs and discuss applications to political competition, bilateral trade, insurance, and information acquisition.