Network Heterogeneity and Value of Information

Abstract: This paper studies how payoff heterogeneity affects the value of information in beauty contest games. I show that public information is detrimental to welfare if and only if agents' Katz-Bonacich centralities exhibit specific forms of heterogeneity, stemming from the network of coordination motives. A key insight is that agents may value the commonality of information so differently that some are harmed by their neighbors knowing what others know. Leveraging this insight, I also show that when the commonality of information is endogenously determined through information sharing, the equilibrium degree of information sharing can be inefficiently low, even without sharing costs.