Information Disclosure in Contests: A Bayesian Persuasion Approach

Abstract

We examine optimal information disclosure through Bayesian persuasion in a two‐player contest. One contestant’s valuation is commonly known and the other’s is his private information. The contest organiser can precommit to a signal to influence the uninformed contestant’s belief about the informed contestant. We show that to search for the optimal signal when the informed contestant’s valuation follows a binary distribution, it is without loss of generality to compare no disclosure with full disclosure; otherwise, such a restriction causes loss of generality. We propose a simple method to compute the optimal signal, which yields explicit solutions in some situations.