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Information Aggregation and Transmission in Strategic Networks

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  • Fan-chin Kung
  • Ping Wang

Abstract

Observing the increasingly important roles played by the creation and transmission of information and tacit knowledge, we construct an information-network model incorporating both information transmitters and information aggregators. Given information-processing roles in aggregation or transmission, we establish various general properties concerning the existence of a network equilibrium, its optimality and the patterns of equilibrium and optimal configuration. We then allow for endogenous choice of the information-processing roles. We prove the existence and show that, with sufficiently small link maintenance costs, the monocentric network with one aggregator connecting to all other agents as transmitters on a tree graph is the unique configuration. In general, a rich array of equilibrium configurations may emerge, including core-star, star-with-satellites and cycles. We further characterize an information-processing chain network with all information aggregators and transmitters linked along a chain and compute numerically the ranges of transmission decays and link costs within which a network equilibrium arises.

Suggested Citation

  • Fan-chin Kung & Ping Wang, 2022. "Information Aggregation and Transmission in Strategic Networks," NBER Working Papers 30585, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:30585
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    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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