The Interval Structure of Optimal Disclosure

Abstract

A fully committed sender persuades a receiver to accept a project through disclosing information regarding a payoff-relevant state. The receiver’s payoff from acceptance increases in the state. The receiver has private information about the state, referred to as his type. We show that the sender-optimal mechanism takes the form of nested intervals: each type accepts on an interval of states and a more optimistic type’s interval contains a less optimistic type’s interval. Hence, the most pessimistic types reject when the receiver benefits from acceptance the most. This mechanism is optimal even if the sender can condition the disclosure mechanism on the receiver’s reported type.