This paper develops a model of costly information acquisition by agents who are connected through a network. For a exogenously given network, each agent decides fi rst on information acquisition from his neighbors and then, after processing the information acquired, takes an action. Each agent is concerned about the extent to which other agents align their actions with the underlying state. A new equilibrium notion, which is in the spirit of perfect Bayesian equilibrium, is proposed to analyze information acquisition decisions within networked groups. This equilibrium notion allows each agent to compute, when deciding about information acquisition, the extent to which changes in his information acquisition decision will a ffect his own perception of future expected payo s. Agents anticipate and incorporate such changes in their information acquisition decisions. Both the efficient and the equilibrium information acquisition pro les are characterized and the compatibility between them is related to the density of the network.
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Length: 39 pages Date of creation: Date of revision: Handle: RePEc:gua:wpaper:ec200801
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
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