It’s always a refreshing activity to start the morning with a MS paper - even better, a freshly published one right in Nov. 2023. Dynamic Persuasion and Strategic Search Yunfei (Jesse) Yao, Management Science 22 Nov 2023 ABSTRACT Consumers frequently search for information before making decisions. Because their search and purchase decisions depend on the information environment, firms have a strong incentive to influence it. This paper endogenizes the consumer’s information environment from the firm’s perspective and endogenizes the search decision from the consumer’s perspective. We consider a dynamic model where a firm sequentially persuades a consumer to purchase the product. The consumer only wishes to buy the product if it is a good match. The firm designs the information structure. Given the endogenous information environment, the consumer trades off the benefit and cost of information acquisition and decides whether to search for more information. Given the information acquisition strategy of the consumer, the firm trades off the benefit and cost of information provision and determines how much information to provide. This paper characterizes the optimal information structure under a general signal space. We find that the firm only smooths information provision over multiple periods if the consumer is optimistic about the product fit before searching for information. Moreover, if the search cost for the consumer is high, the firm designs the information such that the consumer will be certain that the product is a good match and will purchase it after observing a positive signal. If the search cost is low, the firm provides noisy information such that the consumer will be uncertain about the product fit but will still buy it after observing a positive signal. ...

Finished reading the paper Suspense And Surprise finally. Honestly, the paper itself is already a masterclass of organizing contents so as to achieve high informational utility. Following what we left yesterday, here’s the rest, and some closing thoughts before the end. Illustrations of Suspense-Opt. Info Policies In the simplest setting where there are only two states $\Omega = \{A, B\}$ (i.e. whether AGT or FRA would win in the world cup final), suspense maximizing belief martingale give rise to the followig dynamics. Say, starting from initial prior$\mu_A = \mu_B = 0.5$, at period $t$ the optimal belief (say, WLOG let’s consider one side of the world, $\mu_t \equiv \text{Pr}(A)$), either takes a high value $\mu_t = H_t > 1/2$ or low value $\mu_t = L_t = 1 - H_t$. Stepping onto the next period, there are two possible changes to the new belief $\mu_{t + 1}$ - with high possibility the agent observes additional confirmation - that the higher(lower) belief gets “confirmed” a little bit further, like $H_t \to H_{t +1}$ where $H_{t + 1} > H_t$ and vice versa for $L_t$. Alternatively with small possibility, a plot twist happens, $H_t \to L_{t + 1}$ and vice versa for $L_t$. ...

the model, and the principal’s problem part I

a little about music, and application of suspense (aka procrastination)

The very first day of 2024 begins with a lovely paper that I stumbled upon, like, two days ago?

With genuine love and cherishment, waving goodbye to the beautiful 2023. 2024 is gonna be better, and is shaping up to be spicy already. can’t wait

It’s pretty scary when one signed up for 2 Azure accounts, with student verification failed (no free $100) but credit card information surrenderred. Also, the account sign-up process is tedious. Luckily I’ve taken HPC courses this summer so things are smooth later on - deploying containers and starting to run workloads… Manipulating multiple virtual machines with super capable computing power does feel awesome, until you somehow realized that you’re actually paying for them. ...

I read an eye-openly impressive paper today - Attention Management by Lipnowski, Mathevet and Wei. TBH, their model is very insightful (well, it’s in AER afterall…) and has potential to shed light on theoretical as well as behavioral econ research.

Well, art is art and everything else is everything else (although some might argue that classifying pop music as art would be problematic. bite me).

On December 22nd during DongZhi, there is the tradition of eating dumplings. Dumplings, once a symbol of warmth and comfort during the deep winter, now seem increasingly commercialized and expensive, particularly in chain stores and food delivery services. This shift reflects less of the cherished tradition and more of a capital-driven venture, stripping away the essence of what made these foods special. An explanation I came across sheds light on this transformation: ...