The bullsh*t tax: Taxing persuasion expenditures to encourage early concessions

    Research output: Working paperDiscussion paper


    This paper analyses dynamic and costly advocacy by an informed party. In continuous time, an advocate produces a costly signal in order to persuade a target audience that his preferred position is the correct one. Since persuasion expenditures are costly, advocates campaigning against the audience's interest quit if the audience's beliefs about the case become so adverse that the option value of remaining active fails to cover the expected costs. I highlight the value of such \emph{concessions}, as opposed to gradual persuasion, in conveying payoff-relevant information to the audience. I show that since advocates fail to account for the audience's informational benefit in their concession decision, increasing the private marginal cost of persuasion by means of a pigouvian tax induces early concessions and improves welfare. The quality of the audience's eventual decision-making is not improved by the tax, but decisions occur quicker and advocates incur fewer persuasion-related expenses.
    Original languageEnglish
    Number of pages17
    Publication statusPublished - 14 Jan 2018


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