Constrained Information Design

Abstract

We provide tools to analyze information design problems subject to constraints. We do so by extending an insight by Le Treust and Tomala to the case of multiple inequality and equality constraints. Namely, that an information design problem subject to constraints can be represented as an unconstrained information design problem with additional states, one for each constraint. Thus, without loss of generality, optimal solutions induce as many posteriors as the number of states and constraints. We provide results that refine this upper bound. Furthermore, we provide conditions under which there is no duality gap in constrained information design, thus validating a Lagrangian approach. We illustrate our results with applications to mechanism design with limited commitment and persuasion of a privately informed receiver. Funding: L. Doval acknowledges the support of the National Science Foundation through [Grant SES-2131706]. V. Skreta acknowledges the support from the National Science Foundation through [Grant SES-1851729] and from the European Research Council (ERC) through consolidator [Grant 682417]. Supplemental Material: The e-companion is available at https://doi.org/10.1287/moor.2022.1346 .