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Information Trading in Social Networks

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  • Karavaev, Andrei

Abstract

This paper considers information trading in fixed networks of economic agents who can only observe and trade with other agents with whom they are directly connected. We study the nature of price competition for information in this environment. The linear network, when the agents are located at the integer points of the real line, is a specific example I completely characterize. For the linear network there always exists a stationary equilibrium, where the strategies do not depend on time. I show that there is an equilibrium where any agent has a nonzero probability of staying uninformed forever. Under certain initial conditions this equilibrium is a limit of equilibria of finite-horizon games. The role of a transversality condition is emphasized, namely that the price in the transaction should not exceed the expected utility of all the agents who get the information due to the transaction. I show that the price offered does not converge to zero with time.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9110.

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Date of creation: 15 Mar 2008
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Handle: RePEc:pra:mprapa:9110

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Related research

Keywords: Networks; information trading; information diffusion;

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  1. Polanski, Arnold, 2007. "A decentralized model of information pricing in networks," Journal of Economic Theory, Elsevier, Elsevier, vol. 136(1), pages 497-512, September.
  2. Abhijit Banerjee & Kaivan Munshi, 2000. "Networks, Migration and Investment: Insiders and Outsiders in Tirupur's Production Cluster," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 313, William Davidson Institute at the University of Michigan.
  3. Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 2058, David K. Levine.
  4. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
  5. Conley, T.G. & Udry, C.R., 2000. "Learning about a New Technology: Pineapple in Ghana," Papers, Yale - Economic Growth Center 817, Yale - Economic Growth Center.
  6. Muto, Shigeo, 1986. "An Information Good Market with Symmetric Externalities," Econometrica, Econometric Society, Econometric Society, vol. 54(2), pages 295-312, March.
  7. Eshel, Ilan & Samuelson, Larry & Shaked, Avner, 1998. "Altruists, Egoists, and Hooligans in a Local Interaction Model," American Economic Review, American Economic Association, American Economic Association, vol. 88(1), pages 157-79, March.
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