Optimality of Public Persuasion for Single-Good Allocation

When Sharing the Same Information Is Optimal Should a school advisor tailor recommendation letters to different employers or share the same information with everyone? Similar questions arise in start-up fundraising and biotech partnerships. In “Optimality of Public Persuasion for Single-Good Allocation,” Chen and Qi study how a sender can strategically disclose information when allocating an indivisible good to at most one self-interested receiver. The sender may send tailored private messages to individual receivers or publicly broadcast the same information to everyone. Surprisingly, the authors show that, when the sender has a known preference ordering over receivers, public persuasion is optimal even if receivers can subsequently communicate and share information. The optimal public mechanism can be derived from a simpler first-best allocation problem subject only to receivers’ participation constraints. The authors also develop a dual approach to characterize the structure of optimal mechanisms when the good’s characteristics are captured by a one-dimensional variable and all receivers’ utility functions are linear in this variable and reveal an intriguing decoupling structure.