Indirect Persuasion

Abstract

We provide an organizational economics foundation for commitment to information structures in persuasion. An uninformed principal faces a joint screening-and-persuasion problem: she wants to influence a receiver’s belief about a payoff-relevant state using information elicited from a privately informed agent. The agent’s messages are publicly observed, so the principal cannot commit to a garbling of private communications. We show that commitment only to an employment contract with the agent permits the principal to implement the optimal unconstrained intermediation scheme. We apply our result to a brokerage contracting with sell-side analysts, where private communication is constrained by conflict-of-interest regulations, showing that public investment rating schemes can sidestep these regulations.