Persuasion Gains and Losses from Peer Communication

Abstract

We study a Bayesian persuasion setting in which a sender wants to persuade a critical mass of receivers by revealing partial information about the state to them. The homogeneous binary-action receivers are located on a communication network, and each observes the private messages sent to them and their immediate neighbors. We examine how the sender's expected utility varies with increased communication among receivers. We show that for general families of networks, extending the network can strictly benefit the sender. Thus, the sender's gain from persuasion is not monotonic in network density. Moreover, many network extensions can achieve the upper bound on the sender's expected utility among all networks, which corresponds to the payoff in an empty network. This is the case in networks reflecting a clear informational hierarchy (e.g., in global corporations), as well as in decentralized networks in which information originates from multiple sources (e.g., influencers in social media). Finally, we show that a slight modification to the structure of some of these networks precludes the possibility of such beneficial extensions. Overall, our results caution against presuming that more communication necessarily leads to better collective outcomes.