Information Design in Coalition Formation Games

Abstract

I examine a setting, where an information sender conducts research into a payoff-relevant state variable, and releases information to agents, who consider joining a coalition. The agents' actions can cause harm by contributing to a public bad. The sender, who has commitment power, by designing an information mechanism (a set of signals and a probability distribution over them), maximises his payoff, which depends on the action taken by the agents, and the state variable. I show that the coalition size, as a function of beliefs of agents, is an endogenous variable, induced by the information sender. The optimal information mechanism from the general set of public information mechanisms, in coalition formation games is derived. I also apply the results to International Environmental Agreements (IEAs), where a central authority, as an information sender, attempts to reduce the global level of greenhouse gases (GHG) by communication of information on social cost of GHG.

Self-Enforcing Climate Coalitions for Farsighted Countries: Integrated Analysis of Heterogeneous Countries

“…However, Ray and Vohra (2001) generalise the farsighted coalition formation of Ray and Vohra (1999) to the case of public goods. Analysing IEAs, Vosooghi (2017) uses the assumption of farsighted stability in a stochastic setting while Diamantoudi andSartzetakis (2018) andDe Zeeuw (2008) analyse it in deterministic settings. De Zeeuw (2008) studies the effect of a gradual adjustment of emission reduction in a simplified IEA, and shows numerically that the stable number of signatories under farsightedness depends on the relative cost of emission adjustment and climate damages.…”

Information disclosure and dynamic climate agreements: Shall the IPCC reveal it all?

“…However, it relates to the strand of Bayesian persuasion literature, with the seminal paper of Kamenica and Gentzkow (2011). In a companion paper, Vosooghi (2017) generalises their information communication framework to the coalition formation and IEAs, in a binary-action setting. Here, the action space (the abatement space) is a continuum.…”