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Acquiring Information Through Peers

91 Pages Posted: 3 Jun 2015 Last revised: 31 Aug 2017

Bernard Herskovic

University of California, Los Angeles (UCLA) - Anderson School of Management

Joao Ramos

Marshall School of Business - University of Southern California

Date Written: August 30, 2017

Abstract

We study how networks of informational flows are formed when agents acquire information through peers. We develop an endogenous network formation model, in which agents care not only about accuracy of their decision making but also about the actions other agents will take. We show that any strict equilibrium information structure is a hierarchical network. In addition, if the marginal cost of forming links is weakly increasing, the equilibrium network is core-periphery. Even if agents are ex-ante identical, the equilibrium information structure generates ex-post heterogeneity in payoffs and actions. In any equilibrium, agents are sorted into layers of influence. Some individuals endogenously become opinion makers and have pervasive influence over the society, although they may not have superior information. Finally, we study how individual characteristics determine agents' role in the network.

Keywords: Network Formation, Information Acquisition, Coordination

JEL Classification: D83, D85

Suggested Citation

Herskovic, Bernard and Ramos, Joao, Acquiring Information Through Peers (August 30, 2017). Available at SSRN: https://ssrn.com/abstract=2613202 or http://dx.doi.org/10.2139/ssrn.2613202

Bernard Herskovic

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

Los Angeles, CA 90095-1481
United States

HOME PAGE: http://bernardherskovic.com

Joao A Ramos (Contact Author)

Marshall School of Business - University of Southern California ( email )

701 Exposition Boulevard, STE 205
Los Angeles, CA 90089-1422
United States

HOME PAGE: http://www.joaoaramos.com/

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