Persuading a Credible Agent

TL;DR

This paper investigates optimal persuasion strategies in a setting with credible agents, revealing that standard mechanisms are often suboptimal and proposing multi-stage mechanisms with pre-signaling and non-binding elicitation for improved outcomes.

Contribution

It introduces a new credible agent model, demonstrating the limitations of traditional mechanisms and developing a polynomial-time algorithm for optimal multi-stage mechanisms.

Findings

Standard incentive compatible mechanisms may be suboptimal in credible settings.

Optimal mechanisms require multi-stage processes with pre-signaling and non-binding elicitation.

Partial information elicitation can further enhance the principal's payoff.

Abstract

How to optimally persuade an agent who has a private type? When elicitation is feasible, this amounts to a fairly standard principal-agent-style mechanism design problem, where the persuader employs a mechanism to first elicit the agent's type and then plays the corresponding persuasion strategy based on the agent's report. The optimal mechanism design problem in this setting is relatively well-understood in the literature, with incentive compatible (IC) mechanisms known to be optimal and computationally tractable. In this paper, we study this problem given a credible agent, i.e., if the agent claims they are of a certain type in response to the mechanism's elicitation, then they will act optimally with respect to the claimed type, even if they are actually not of that type. We present several interesting findings in this new setting that differ significantly from results in the non-credible setting. In terms of the structure of optimal mechanisms, we show that not only may IC mechanisms fail to be optimal, but all mechanisms following the standard `eliciting-then-persuading' mechanism design structure may be suboptimal. To achieve optimality requires two additional instruments -- pre-signaling and non-binding elicitation -- which naturally result in multi-stage mechanisms. We characterize optimal mechanisms under these design choices. Based on our characterization, we provide a polynomial-time algorithm for computing optimal multi-stage mechanisms. We also discover that in scenarios that allow for it, partial information elicitation can be employed to improve the principal's payoff even further. Though, surprisingly, an unbounded number of rounds of information exchange between the principal and the agent may be necessary to achieve optimality.