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Strategic communication networks

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Abstract

We consider situations in which individuals would like to choose an action which is close to that of others, as well as close to a state of nature, with the ideal proximity to the state varying across agents. Before this coordination game is played, a cheap-talk communication stage is offered to the indivisuals who decide to whom they reveal their private information about the state. The information transmission occurring in the communication stage is characterized by a strategic communication network. We provide an explicit link between players' preferences and the equilibrium strategic communication networks. A key feature of our equilibrium characterization is that whether communication takes place between two agents not only depends on the conflict of interest between these agents, but also on the number and preferences of the other agents with whom they communicate. Apart from some specific cases, the equilibrium communication networks are quite complex despite our simple one-dimensional description of preference heterogeneity. In general, strategic communication networks cannot be completely Pareto-ranked, but expected social welfare always increases as the communication network expands.

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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 09005.

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Length: 33 pages
Date of creation: Feb 2009
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Handle: RePEc:mse:cesdoc:09005

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Keywords: Cheap talk; coordination; incomplete information; networks.;

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References

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  1. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
  2. Van Zandt, Timothy & Vives, Xavier, 2007. "Monotone equilibria in Bayesian games of strategic complementarities," Journal of Economic Theory, Elsevier, vol. 134(1), pages 339-360, May.
  3. Antoni Calvó-Armengol & Joan de Martí, 2007. "Communication Networks: Knowledge and Decisions," American Economic Review, American Economic Association, vol. 97(2), pages 86-91, May.
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Citations

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Cited by:
  1. Maria Goltsman & Gregory Pavlov, 2008. "How to Talk to Multiple Audiences," UWO Department of Economics Working Papers 20081, University of Western Ontario, Department of Economics.
  2. Daron Acemoglu & Kostas Bimpikis & Asuman E, Ozdaglar, 2010. "Dynamics of Information Exchange in Endogenous Social Networks," Levine's Working Paper Archive 661465000000000216, David K. Levine.
  3. Daron Acemoglu & Asuman E. Ozdaglar, 2010. "Opinion Dynamics and Learning in Social Networks," Levine's Working Paper Archive 661465000000000222, David K. Levine.
  4. Choi, Syngjoo & Lee, Jihong, 2009. "Communication, Coordination and Networks," MPRA Paper 19055, University Library of Munich, Germany.
  5. Salvatore Piccolo & Emanuele Tarantino, 2011. "Managerial Compensations and Information Sharing under Moral Hazard: Is Transparency Good?," CSEF Working Papers 294, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  6. Acemoglu, Daron & Ozdaglar, Asuman & ParandehGheibi, Ali, 2010. "Spread of (mis)information in social networks," Games and Economic Behavior, Elsevier, vol. 70(2), pages 194-227, November.
  7. repec:spr:inrvec:v:1:y:2011:i:1:p:3-49 is not listed on IDEAS
  8. Jeanne Hagenbach & Frédéric Koessler, 2011. "Full Disclosure in Decentralized Organizations," PSE Working Papers halshs-00652279, HAL.
  9. Andrea Galeotti & Christian Ghiglino & Francesco Squintani, 2009. "Strategic Information Transmission in Networks," Economics Discussion Papers 668, University of Essex, Department of Economics.
  10. Salvatore Piccolo, 2011. "Communicating Vertical Hierarchies: the Adverse Selection Case," CSEF Working Papers 273, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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