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Optimal Transport of Information

Author

Listed:
  • Semyon Malamud

    (Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute)

  • Anna Cieslak

    (Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER))

  • Andreas Schrimpf

    (Bank for International Settlements (BIS) - Monetary and Economic Department)

Abstract
We study the general problem of optimal information design with continuous actions and continuous state space in arbitrary dimensions. First, we show that with a finite signal space, the optimal information design is always given by a partition. Second, we take the limit of an infinite signal space and characterize the solution in terms of a Monge-Kantorovich optimal transport problem with an endogenous information transport cost. We use our novel approach to: 1. Derive necessary and sufficient conditions for optimality based on Bregman divergences for non-convex functions. 2. Compute exact bounds for the Hausdorff dimension of the support of an optimal policy. 3. Derive a non-linear, second-order partial differential equation whose solutions correspond to regular optimal policies.

Suggested Citation

  • Semyon Malamud & Anna Cieslak & Andreas Schrimpf, 2021. "Optimal Transport of Information," Swiss Finance Institute Research Paper Series 21-15, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2115
    as

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    References listed on IDEAS

    as
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    Cited by:

    1. Itai Arieli & Yakov Babichenko & Fedor Sandomirskiy, 2023. "Feasible Conditional Belief Distributions," Papers 2307.07672, arXiv.org, revised Nov 2024.

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    More about this item

    Keywords

    Bayesian Persuasion; Information Design; Signalling; Optimal Transport;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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