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Clustering in communication networks with different-minded participants

Author

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  • Laurent, Thibault
  • Panova, Elena

Abstract

We consider a game with players who build links to exchange their opinions on the relevant state and reduce their uncertainty on it. Opinions transmit private signals with frictions (termed interpretation noise) because the players hold imperfectly correlated subjective priors on the state. Communication is limited to two rounds. For tractability, we focus on an arbitrarily small correlation of priors and allow for misspecified beliefs on a distant network. We find that player's uncertainty remaining after communication is given by and decreasing in: the number of his friends with only common connections, and the total number of his local and distant friends. The egalitarian efficient network is: a complete component if the interpretation noise is sufficiently high, and a flower otherwise. It constitutes a Nash equilibrium. We show numerically that these results may hold in general, if the correlation of players' priors is sufficiently weak. Furthermore, egalitarian efficiency criterion may be replaced with utilitarian one.

Suggested Citation

  • Laurent, Thibault & Panova, Elena, 2020. "Clustering in communication networks with different-minded participants," TSE Working Papers 20-1147, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:124728
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    References listed on IDEAS

    as
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    5. Li, Wei & Tan, Xu, 2020. "Locally Bayesian learning in networks," Theoretical Economics, Econometric Society, vol. 15(1), January.
    6. Hojman, Daniel A. & Szeidl, Adam, 2008. "Core and periphery in networks," Journal of Economic Theory, Elsevier, vol. 139(1), pages 295-309, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    network formation; clustering; differentiated priors;
    All these keywords.

    JEL classification:

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

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