Acquiring Information Through Peers
71 Pages Posted: 3 Jun 2015 Last revised: 28 Nov 2018
Date Written: August 2, 2018
We develop an endogenous network formation model, in which agents form connections to acquire information. Our model features complementarity in actions as agents care not only about accuracy of their decision making but also about the actions of other agents. In equilibrium, the information structure is a hierarchical network, and, under weakly convex cost of forming links, the equilibrium network is core-periphery. Even if agents are ex-ante identical, there is ex-post heterogeneity in payoffs and actions. Finally, we study how individual characteristics define agents' roles in the network, highlighting the importance of resoluteness and information precision.
Keywords: Network Formation, Information Acquisition, Coordination
JEL Classification: D83, D85
Suggested Citation: Suggested Citation