Acquiring Information Through Peers

79 Pages Posted: 3 Jun 2015 Last revised: 2 May 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: March 1, 2017

Abstract

Individual decisions are often influenced and informed by peers. We study how networks of informational flows are formed when agents acquire information from peers. In our framework, agents' actions balance adaptation and coordination motives, as in a beauty contest game. Agents may connect to each other to obtain information about the state of the economy. In equilibrium, some agents endogenously become opinion makers who are more influential, even if all agents are ex-ante identical. We show that agents prefer to connect to opinion makers first, and that opinion makers form fewer connections. We characterize the endogenous shape of the network, and we show that any strict Nash equilibrium generates a hierarchical network. Furthermore, if the marginal cost of forming links is increasing, the network is core-periphery. 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 (March 1, 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/

Paper statistics

Downloads
193
Rank
129,003
Abstract Views
686