Dynamics Of Information Exchange In Endogenous Social Networks

The authors develop a model of information exchange through communication and investigate its implications for information aggregation in large societies. An underlying state determines payoffs from different actions. Agents decide which others to form a costly communication link with incurring the associated cost. After receiving a private signal correlated with the underlying state, they exchange information over the induced communication network until taking an (irreversible) action. They define asymptotic learning as the fraction of agents taking the correct action converging to one in probability as a society grows large.