Blockchain Mediated Persuasion

Kimon Drakopoulos, Irene Lo, Justin Mulvany

Abstract: In the classic Bayesian Persuasion model studied by [Kamenica and Gentzkow, 2011], there are two players: the first, called Sender, wishes to persuade the second, called Receiver, to take a desired action. Provided that Sender is ex-post better informed about the underlying state of the world, Sender can leverage their informational advantage by communicating with Receiver via a signal mechanism. However, Sender's ability to effectively manage Receiver's beliefs largely hinges on the assumption that Sender can credibly commit to a signal mechanism. Usually, it is not ex-post optimal for Sender to follow the mechanism, but instead to deviate and send the message that generates the highest payoff. Consequently, Receiver may not have faith in Sender's ability to commit. In this case, all bets are off: persuasion devolves into cheap talk.