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The Structure of Information Networks

Author

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  • Sudipta Sarangi
  • R. Kannan
  • L. Ray

Abstract

We develop a model of information acquisition in a network where agents pay for all the information they acquire including those through indirect links. The cost of information depends on the value of information itself and the distance it traverses in the network. We find that when the costs of information increase with distance, the complete network is the only Nash network. When costs of information decrease with distance capturing delay, all equilibrium information networks are minimally connected, though not all trees are Nash. We analyze the popular star and chain networks and identify strict Nash networks. We show that there is almost no divergence between efficient and equilibrium information networks. We explore the implications of a spatial model and information decay and discuss the relationship with experimental evidence.
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Suggested Citation

  • Sudipta Sarangi & R. Kannan & L. Ray, 2003. "The Structure of Information Networks," Departmental Working Papers 2003-01, Department of Economics, Louisiana State University.
  • Handle: RePEc:lsu:lsuwpp:2003-01
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    File URL: https://www.lsu.edu/business/economics/files/workingpapers/pap03_01.pdf
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    References listed on IDEAS

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    Cited by:

    1. Rajgopal Kannan & Lydia Ray & Sudipta Sarangi, 2007. "The structure of information networks," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(1), pages 119-134, January.
    2. Chenghong Luo & Ana Mauleon & Vincent Vannetelbosch, 2021. "Network formation with myopic and farsighted players," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1283-1317, June.
    3. Breitmoser, Yves & Vorjohann, Pauline, 2013. "Efficient structure of noisy communication networks," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 396-409.
    4. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, University Library of Munich, Germany.
    5. Chenghong Luo & Ana Mauleon & Vincent Vannetelbosch, 0. "Network formation with myopic and farsighted players," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 0, pages 1-35.
    6. Dev, Pritha, 2018. "Networks of information exchange: Are link formation decisions strategic?," Economics Letters, Elsevier, vol. 162(C), pages 86-92.
    7. Filippo Vergara Caffarelli, 2009. "Networks with decreasing returns to linking," Temi di discussione (Economic working papers) 734, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    JEL classification:

    • 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

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