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Alessandro ISPANO - THEMA

"The perils of a coherent narrative"

Abstract : A persuader influences a decision-maker by providing a narrative to interpret some upcoming news. The decision-maker embraces a narrative when it is coherent (likelihoods of each news conditional on a realized state must sum to unity) and compatible with the truth (the marginal distribution of news is undistorted). Even if coherence restricts the set of beliefs the persuader can induce, it may nonetheless harm also the decision-maker. As a result, both players may benefit when the persuader can provide news-contingent, overall incoherent, narratives. Likewise, both players may benefit when the persuader can privately learn the truth, or when he can design the process of news arrival.