Truth Revelation, Information Hiding, or Misinformation: Characterization of Equilibrium Outcomes in Signaling Games

Abstract

In signaling games where a sender and a receiver have misaligned criteria, equilibrium behavior may lead to fully revealing, quantized, or randomized policies. Notably, the first arises in statistical decision theory and classical communication theoretic problems involving a fully aligned sensor and receiver, the second arises in Nash theoretic simultaneous signaling games, and the last may appear in Stackelberg type (leader-follower) Bayesian signaling games. In this paper, we investigate the Bayesian persuasion problem involving a receiver that tries to estimate the source. We show that for certain payoff structures, the equilibrium solution is such that a source observation is mapped to distinct messages with nonzero probabilities. More specifically, we completely characterize conditions under which the sender requires randomization for the Bayesian persuasion problem involving general sources with finite cardinality. In particular, regardless of whether the equilibrium solution under a deterministic policy restriction is fully revealing, quantized or noninformative, there exists a randomized sender policy that improves the sender's payoff under certain conditions characterized in the paper. Moreover, we provide an algorithmic procedure to obtain the Bayesian persuasion solution, where the algorithm compares the payoffs with finitely many posterior probability combinations. We also consider fully aligned and completely misaligned payoff structures, where the solutions respectively involve a fully revealing sender and a noninformative sender. Then, we unify these results by proving that if the sender's expected payoff with respect to posterior distributions is continuous, then the equilibrium solution involves either a fully revealing sender or a noninformative sender.