Robust theory and fragile practice: Information in a world of disinformation Part 2: Direct communication

The chapter surveys the recent work on economics of information with endogenous information structures, where individuals can directly communicate information with each other. We survey the theoretical work on cheap talk, Bayesian persuasion, and information design, and review the implications of information control and information abundance for mis- and disinformation. The relationship between information and market power is particularly important when social media can amplify and maintain harmful fictions that lead to polarization and undermine not only markets, but democratic discourse. We review both the “rational” decision-making paradigm, as well as departures from it, such as cases where decision makers can choose what to know, can allocate their attention in different ways or have behavioural biases that influence their information processing. We note some important connections to legal and media studies and highlight key messages in non-technical language.