Persuasion for the Long Run

Abstract

We examine a persuasion game where concerns about future credibility are the sole source of commitment. A long-run Sender plays a dynamic cheap talk game against short-run Receivers. Even with perfect monitoring, long-run incentives do not substitute for full commitment at the stage game. We show how a simple mechanism that we call a 'coin and cup' can better harness long-run incentives to retrieve payoffs identical to those under full commitment. We also examine how a mediator can approximate these payoff even when monitoring is imperfect. Neither mechanism affects play in the one-shot game. Finally, we discuss both actual and potential applications of these two mechanisms within finance, e-commerce, media, lobbying, cryptography, and central banking. The Sender benefits from better persuasion; Receivers can either benefit or suffer.