Persuasion by strategic obfuscation
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2021-06-02
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Monte, Daniel
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We study a persuasion problem in which the principal chooses how costly it will be for the agent to obtain and process new information. Obfuscation or transparency will be endogenous to the decision problem at hand. Specifically, we combine a rational inattention framework with communication games and Bayesian persuasion problems and we show that under some conditions the optimal induced cost of processing information is non-monotonic, that is, when it is optimal to confuse “just a little”. Thus, our model helps explain why in some environments firms write terms and conditions with so many clauses, whereas in other contexts, contracts might be simple and transparent. It also helps explain why some companies offer varying features that make choosing a product more difficult than it could be. Obfuscation has clear welfare implications that policy makers should bear in mind.