Moral Hazard in Delegated Bayesian Persuasion
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| Format: | Preprint |
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2026
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| _version_ | 1866910161557258240 |
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| author | Fotso, Wilfried Youmbi Chen, Xun |
| author_facet | Fotso, Wilfried Youmbi Chen, Xun |
| contents | We study delegated Bayesian persuasion: a principal incentivizes an intermediary to design information via outcome-contingent transfers, while the intermediary privately chooses the experiment subject to convex costs. We characterize first-best implementability through a pair of alignment conditions on the principal's and intermediary's payoff indices. A local condition on the support of the target experiment is necessary; a global affine alignment condition is sufficient. We show that the gap between them is non-empty and provide a partial characterization of the intermediate region. When the first-best is unattainable, the principal's problem admits a virtual Bayesian persuasion representation: the second-best experiment maximizes the same concavified objective as the first-best, with the principal's payoff index distorted by a single scalar shadow price that summarizes the entire agency friction. Under entropy costs, moral hazard compresses posterior dispersion whenever the intermediary's utility differs across the actions it recommends. Explicit closed-form solutions for posteriors, mixing weights, and the optimal transfer schedule are derived for binary environments. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2604_10006 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Moral Hazard in Delegated Bayesian Persuasion Fotso, Wilfried Youmbi Chen, Xun Theoretical Economics We study delegated Bayesian persuasion: a principal incentivizes an intermediary to design information via outcome-contingent transfers, while the intermediary privately chooses the experiment subject to convex costs. We characterize first-best implementability through a pair of alignment conditions on the principal's and intermediary's payoff indices. A local condition on the support of the target experiment is necessary; a global affine alignment condition is sufficient. We show that the gap between them is non-empty and provide a partial characterization of the intermediate region. When the first-best is unattainable, the principal's problem admits a virtual Bayesian persuasion representation: the second-best experiment maximizes the same concavified objective as the first-best, with the principal's payoff index distorted by a single scalar shadow price that summarizes the entire agency friction. Under entropy costs, moral hazard compresses posterior dispersion whenever the intermediary's utility differs across the actions it recommends. Explicit closed-form solutions for posteriors, mixing weights, and the optimal transfer schedule are derived for binary environments. |
| title | Moral Hazard in Delegated Bayesian Persuasion |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2604.10006 |