Truthful Communication and Exclusive Information Clubs

2026-05-04

AI Summary

This study investigates how endogenous communication networks facilitate truthful information transmission in environments characterized by strategic misreporting. The authors develop a game-theoretic model incorporating private signals, costly link formation, and coordination incentives, integrating tools from Bayesian games, network formation theory, and information economics to examine agents’ trade-offs between information acquisition and incentive compatibility. The analysis reveals that clique structures can sustain truthful communication, and agents endowed with high-precision signals tend to form exclusive information clubs that exhibit core stability under signal-precision ordering. However, due to diminishing marginal returns to information, such stable configurations are not necessarily socially optimal; mixed-group arrangements may instead enhance overall welfare.

Abstract

This paper studies how the possibility of strategic misreporting shapes endogenous communication networks. Agents observe noisy private signals about a common state, form costly communication links, exchange private messages with their neighbors, and then choose actions. Payoffs reward both accuracy and coordination with linked agents. A link is valuable because it gives access to information, but it is useful only if the induced local information structure makes truthful transmission incentive compatible. We show that clique components support truthful communication: within a clique, all members observe the same profile of local signals, choose the same posterior action, and therefore have no incentive to distort reports. With heterogeneous signal precisions and convex linking costs, the core selects assortative information clubs ordered by signal precision. These stable truthful networks need not be socially efficient. Because the informational value of precision is decreasing, concentrating high-precision agents in the same club may be privately stable but socially dominated by more mixed partitions.

Problem

• truthful communication
• information clubs
• strategic misreporting
• endogenous networks
• social efficiency

Innovation

• truthful communication
• endogenous networks
• information clubs
• strategic misreporting
• assortative matching