Truthful Communication and Exclusive Information Clubs

Abstract

This paper studies how strategic communication shapes endogenous communication networks. Agents form costly links, observe noisy private signals about a common state, exchange cheap-talk messages with neighbors, and choose actions that reward accuracy and coordination. We show that full revelation is sustainable if and only if every connected component is a clique. We then characterize the core of the endogenous network-formation game with heterogeneous signal precisions and weakly convex linking costs. Although every network admits non-informative continuation equilibria, every core outcome is truthful and consists of assortative exclusive information clubs generated by a recursive precision-cost maximization procedure. The characterization follows from an individual payoff bound that holds uniformly over all continuation strategy profiles. Core-stable clubs need not be efficient: assortative sorting can concentrate high-precision signals excessively, so a more mixed partition may yield higher aggregate welfare.