Ambiguous persuasion in contests

Abstract

We study optimal information disclosure via an ambiguous persuasion approach in a two-player contest. The designer can precommit to an ambiguous device to influence the uninformed contestant's belief about his opponent's private type. We fully characterize the optimal ambiguous information structures when players are maxmin expected utility (MMEU) maximizers. Depending on the prior, it is optimal to either induce ambiguity or fully conceal information. We provide a necessary and sufficient condition under which an effort-maximizing organizer can benefit strictly more from using ambiguous persuasion than from using the optimal Bayesian device.