Regime Change in Large Information Networks

• Authors: Pau Milán and Joan de Martí.
• BSE Working Paper: 110521 | August 18
• Keywords: Networks , communication , global games , regime change , revolutions
• JEL codes: D74, D82, D83, D85
• Networks
• communication
• global games
• regime change
• revolutions

We study global games of regime change within networks of truthful communication. Agents can choose between attacking and not attacking a status quo, whose strength is unknown. Players share private signals on this state of the world with their immediate neighbors. Communication with neighboring players introduces local correlations in posterior beliefs and also allows for the pooling of information. In order to isolate the latter effect, we provide, as a methodological contribution, sparseness conditions on networks that allow for asymptotic approximations that eliminate covariances from equilibrium strategies. We ask how changes in the distribution of connectivities in the population affect the types of coordination in equilibrium as well as the likelihood of successful rally. We find that without a public signal strategic incentives align, and the probability of success remains independent of the type of network. With a public signal the distribution of degrees unambiguously affects the probability of success, although the direction of change is not monotone, and depends crucially on the cost of attack.