Hierarchical Bayesian Persuasion: Importance of Vice Presidents
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We study strategic information transmission in a hierarchical setting where information gets transmitted through a chain of agents up to a decision maker whose action is of importance to every agent. This situation could arise whenever an agent can communicate to the decision maker only through a chain of intermediaries, for example, an entry-level worker and the CEO in a firm, or an official in the bottom of the chain of command and the president in a government. Each agent can decide to conceal part or all the information she receives. Proving we can focus on simple equilibria, where the only player who conceals information is the first one, we provide a tractable recursive characterization of the equilibrium outcome, and show that it could be inefficient. Interestingly, in the binary-action case, regardless of the number of intermediaries, there are a few pivotal ones who determine the amount of information communicated to the decision maker. In this case, our results underscore the importance of choosing a pivotal vice president for maximizing the payoff of the CEO or president.
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