Word of Mouth when Talk is Cheap: Information Diffusion and Optimal Targeting

Résumé

We study strategic transmission of information about an issue which is not easily verifiable, such as climate change, in a population consisting of two types of agents. A single agent is targeted and learns the true state of the world. Information about the state of the world is then diffused in a chain of communication by cheap talk. Communication is strategic because of payoff externalities: each agent’s payoff is affected by other agents’ actions. We show that truthful diffusion is possible if and only if the strength of externality is at a moderate level, and the preferences of the two types are sufficiently close to each other. There also exist multiple babbling equilibria (i.e. those in which babbling occurs at any stage of the game). We show that only two equilibria are neologism-proof: the truthful equilibrium and one babbling equilibrium. We also investigate which type of agent is the optimal target if the targeter’s objective is to maximise the agents' actions.