“Credibility and Strategic Learning in Networks” by Kalyan Chatterjee
University of Warwick
This paper studies a model of diffusion in a fixed, finite connected network. There is an interested party that knows the quality of the product or idea being propagated and chooses an implant in the network to influence other agents to buy or adopt. Agents are either innovators, who adopt immediately, or rational. Rational consumers buy if buying rather than waiting maximizes expected utility. We consider the conditions on the network under which efficient diffusion of the good product with probability one is a perfect Bayes equilibrium. The structure of the entire network turns out to be important. We also discuss various inefficient equilibria.