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On the Sparsity of Optimal Information Structures

Aug 2026 · 0 citations · 37 references
Economics

Abstract

This paper uncovers general properties of optimal information structures by exploiting a linear-programming formulation of information design. A critical observation is that an optimum can be found as ``sparse,''i.e., many coordinates of the action-state joint distribution are zero. This implies that, once part of an action-state profile is fixed, there is limited room for the remaining part to fluctuate. As a result, agents'action recommendations are conditionally deterministic in many states, or correlated in a way that allows some agents to infer others'recommendations. The implications of sparsity are illustrated in an adoption problem, where the designer maximizes the number of adopters of an innovation that features network effects. The optimal information structure deterministically recommends full adoption in high states, while it randomizes over nested action profiles in low states, so that whenever an agent is recommended to adopt, she is certain that more optimistic agents also adopt.

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