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Dynamics of strategic information transmission in social networks

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  • Foerster, Manuel

    (Department of Economics, University of Hamburg)

Abstract

We develop a dynamic framework of strategic information transmission through cheap talk in a social network. Privately informed agents have different preferences about the action to be implemented by each agent and repeatedly communicate with their neighbors in the network. We first characterize myopic (best response) equilibria as well as fully informative myopic equilibria. Second, we provide a sufficient condition for the existence of a fully informative farsighted (perfect Bayesian) equilibrium. Fully informative myopic and farsighted equilibria essentially take a particular simple form: all communication is truthful along a subnetwork that is a tree. We also consider societies in which both myopic and farsighted agents are present and analyze equilibrium welfare. Furthermore, we extend our model to public communication and investigate the implications of our results for the design of institutions. Finally, our analysis reveals that myopic equilibria tend to Pareto dominate farsighted equilibria, in particular if a social planner has designed the network optimally.

Suggested Citation

  • Foerster, Manuel, 2019. "Dynamics of strategic information transmission in social networks," Theoretical Economics, Econometric Society, vol. 14(1), January.
  • Handle: RePEc:the:publsh:3056
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    1. Luca Paolo Merlino & Nicole Tabasso, 2019. "Debunking Rumors in Networks," Working Papers 2019: 29, Department of Economics, University of Venice "Ca' Foscari".
    2. Foerster, Manuel, 2018. "Finite languages, persuasion bias, and opinion fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 46-57.

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    More about this item

    Keywords

    Cheap talk; information aggregation; learning; social networks; strategic communication;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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