Adversarial bilateral information design

Research output: Working paper

Abstract

Information provision is a significant component of business-to-business interaction. Furthermore, the provision of information is often conducted bilaterally. This precludes the possibility of commitment to a grand information structure if there are multiple receivers. Consequently, in a strategic situation, each receiver needs to reason about what information other receivers get. Since the information provider does not know this reasoning process, a motivation for a robustness requirement arises: the provider seeks an information structure that performs well no matter how the receivers actually reason. In this paper, I provide a general method to study how to optimally provide information under these constraints. The main result is a representation theorem, which makes the problem tractable by reformulating it as a linear program in belief space. Furthermore, I provide novel bounds on the correlation among receivers’ beliefs, which provide even more tractability in some special cases. I illustrate the main result by solving for the optimal provision of information in a stylized model of contract research organizations, which are an integral part of the pharmaceutical industry.
Original languageEnglish
Pages1-63
Number of pages63
Publication statusPublished - 26 Mar 2020

Keywords

  • bilateral contracting
  • information design
  • robust design
  • adversarial design
  • belief manipulation
  • belief distributions
  • Bayes plausibility
  • Frechet-Hoeffding bounds
  • dependence bounds

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