Information Disclosure and Network Formation in News Subscription Services

18 Pages Posted: 28 Sep 2020

See all articles by Chin-Chia Hsu

Chin-Chia Hsu

Institute for Data, Systems, and Society, Massachusetts Institute of Technology

Amir Ajorlou

Massachusetts Institute of Technology - Laboratory for Information and Decision Systems

Muhamet Yildiz

Massachusetts Institute of Technology (MIT) - Department of Economics

Ali Jadbabaie

Institute for Data, Systems, and Society, Massachusetts Institute of Technology

Date Written: September 9, 2020

Abstract

We study the formation of a subscription network where a continuum of strategic, Bayesian subscribers decide to subscribe to one of two sources (leaders) for news that is informative about an underlying state of the world. The leaders, aiming to maximize the welfare of all subscribers, have a motive to persuade the subscribers to take the optimal binary action against the state according to their own perspectives. With this persuasion motive, each leader decides whether to disclose the news to her own subscribers when there is news. When the subscribers receive the news, they update their beliefs; more importantly, even when no news is disclosed, the subscribers update their beliefs, speculating that there may be news that was concealed due to the leader's strategic disclosure decision. We prove that at any equilibrium, the set of news signals that are concealed by the leaders takes the form of an interval. We further show that when two leaders represent polarized and opposing perspectives, anti-homophily emerges among the subscribers whose perspectives are in the middle. For any subscriber with a perspective on the extremes, and for any leader, there exists an equilibrium at which the subscriber would follow the leader. Our results shed light on how individuals would seek information when information is private or costly to obtain, while considering the strategic disclosure by the news providers who are partisan and have a hidden motive to persuade their followers.

Keywords: Network Formation, Persuasion, Strategic Information Disclosure

JEL Classification: D01, D82, D83, D85

Suggested Citation

Hsu, Chin-Chia and Ajorlou, Amir and Yildiz, Muhamet and Jadbabaie, Ali, Information Disclosure and Network Formation in News Subscription Services (September 9, 2020). Available at SSRN: https://ssrn.com/abstract=3689990 or http://dx.doi.org/10.2139/ssrn.3689990

Chin-Chia Hsu (Contact Author)

Institute for Data, Systems, and Society, Massachusetts Institute of Technology ( email )

77 Massachusetts Ave E17-442
Cambridge, MA 02139
United States
6179490669 (Phone)

HOME PAGE: http://chinchia.mit.edu

Amir Ajorlou

Massachusetts Institute of Technology - Laboratory for Information and Decision Systems ( email )

E32-D569, 32 Vassar Street,
Cambridge, MA 02139
United States
215-919-3234 (Phone)

HOME PAGE: http://www.mit.edu/~ajorlou

Muhamet Yildiz

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-522
Cambridge, MA 02142
United States
617-253-5331 (Phone)
617-253-6915 (Fax)

Ali Jadbabaie

Institute for Data, Systems, and Society, Massachusetts Institute of Technology ( email )

77 Massachusetts Ave E18-309C
E18-309C
02139, MA MA 02139
United States
6172537339 (Phone)
6172537339 (Fax)

HOME PAGE: http://web.mit.edu/www/jadbabai

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