Information Compression in Dynamic Information Disclosure Games

We consider a two-player dynamic information design problem between a principal and a receiver – a game is played between the two agents on top of a Markovian system controlled by the receiver's actions, where the principal obtains and strategically shares some information about the underlying system with the receiver in order to influence their actions. In our setting, both players have long-term objectives, and the principal sequentially commits to their strategies instead of committing at the beginning. Further, the principal cannot directly observe the system state, but at every turn they can choose randomized experiments to observe the system partially. The principal can share details about the experiments to the receiver. For our analysis we impose the truthful disclosure rule: the principal is required to truthfully announce the details and the result of each experiment to the receiver immediately after the experiment result is revealed. Based on the received information, the receiver takes an action when its their turn, with the action influencing the state of the underlying system. We show that there exist Perfect Bayesian equilibria in this game where both agents play Canonical Belief Based (CBB) strategies using a compressed version of their information, rather than full information, to choose experiments (for the principal) or actions (for the receiver). We also provide a backward inductive procedure to solve for an equilibrium in CBB strategies.