Information aggregation and transmission in strategic networks

Abstract

We study an information network incorporating both information transmitters and aggregators. Given these roles, an array of network patterns (the geodesic-distance network, core-star, overlapping-core-stars, star-with-satellite, cycles) emerges as equilibrium and/or efficient, depending on transmission rates and link costs. When aggregator roles are endogenously determined, the monocentric network with one aggregator connecting to all other transmitters on a tree graph is the unique equilibrium pattern under sufficiently high transmission rates and small link costs. With moderate transmission rates and link costs, the multicentric network with multiple aggregators may arise—in this case, the monocentric network may not be efficient.