Optimal Information Transmission

26 May 2015
Author: Wei Ma
Publication Type: Working Paper
JEL Code: D73, D83
This paper addresses the issue of how a given piece of information should be transmitted from a better-informed doctor to an ill-informed patient. The information to be transmitted is expressed as a probability distribution on a space of the patient’s possible health states. For a formal analysis of the issue we develop a two-person dynamic game, in which the doctor sends a sequence of messages to the patient to inform him of his health state, and the patient, after receiving each message, chooses an action in an attempt to improve upon his current health status. We study some standard properties of the equilibria of this game; in particular, we show that it has a subgame perfect equilibrium. 
Working paper 519
1 May 2015