A benevolent sender communicates non-instrumental information over time to a Bayesian receiver who experiences gain-loss utility  over changes in beliefs ("news utility") . We show how to compute the optimal dynamic information structure for arbitrary news-utility functions. With diminishing sensitivity over the magnitude of news , one-shot resolution of uncertainty is strictly suboptimal under commonly used functional forms. Information structures that deliver bad news gradually are never optimal. We identify additional conditions that imply the sender optimally releases good news in small pieces but bad newsin one clump. When the sender lacks commitment power, diminishing sensitivity leads to a credibility problem for good-news messages. Without loss aversion, the babbling equilibrium is essentially unique  . More loss-averse receivers may enjoy higher equilibrium news-utility , contrary to the commitment case  . We discuss applications to media competition and game shows.
A Bayesian agent experiences gain-loss utility each period over changes in belief about future consumption ("news utility") , with diminishing sensitivity over the magnitude of news . We show the agent's preference between an information structure that delivers news gradually and another that resolves all uncertainty at once depends on his consumption ranking of different states. One-shot resolution is better than gradual bad news, but it is not optimal among all information structures (under common functional forms). In a dynamic cheap-talk framework where a benevolent sender communicates the state over multiple periods, the babbling equilibrium is essentially unique without loss aversion . More loss-averse agents may enjoy higher news utility in equilibrium , contrary to the commitment case . We characterize the family of gradual good news equilibria that exist with high enough loss aversion, and find the sender conveys progressively larger pieces of good news . We discuss applications to media competition and game shows.
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benevolent sender communicates non-instrumental information over time to a Bayesian receiver who
Bayesian agent
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each period
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beliefs
belief about future consumption
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. We show how to compute the optimal dynamic information structure for arbitrary news-utility functions. With
, with
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, one-shot resolution of uncertainty is strictly suboptimal under commonly used functional forms. Information structures that deliver bad news gradually are never optimal. We identify additional conditions that imply the sender optimally releases good news in small pieces but bad newsin one clump. When the sender lacks commitment power, diminishing sensitivity leads to a credibility problem for good-news messages. Without loss aversion,
. We show the agent's preference between an information structure that delivers news gradually and another that resolves all uncertainty at once depends on his consumption ranking of different states. One-shot resolution is better than gradual bad news, but it is not optimal among all information structures (under common functional forms). In a dynamic cheap-talk framework where a benevolent sender communicates the state over multiple periods,
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without loss aversion
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receivers
agents
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equilibrium news-utility
news utility in equilibrium
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. We characterize the family of gradual good news equilibria that exist with high enough loss aversion, and find the sender conveys progressively larger pieces of good news