Information in Networks and Political Economy: Three Models

This thesis spans over topics that share a need for theoretical insights. Taking a game theoretical approach, I study the link between social media and the quality of digital news; the role of a communication network in the provision of information; and the mechanisms behind diversionary conflicts. The quality of information provided in a network is endogenous to it. The first chapter studies the news producers' role in it. Social media create a new type of incentives for producers. Consumers share content, influence the visibility of articles and determine the advertisement revenues ensuing. I study these incentives and evaluate the potential quality of ad-funded online news. Producers rely on a subset of rational and unbiased consumers to spread news articles. The resulting news has low precision and ambiguous welfare effects. Producers' incentive to invest in quality increases with the private knowledge of the topic; hence, when information is most needed, the generated news tends to be of lesser quality. Competition does not necessarily improve news quality – it does so only if the network is sufficiently dense. While ad-funded online news occasionally helps consumers take better decisions, it creates welfare mostly through entertainment. Some interventions, such as flagging wrong articles, substantially improve the outcome; other approaches, such as quality certification, do not. The second chapter tackles the issue of the provision of information by a designer with misaligned interests. A sender wants to induce connected receivers to take some actions by committing to a signal structure about a payoff-relevant state. I wonder about the role of the network on information provision when signals are shared among neighbors. Receivers differ in their priors; the sender wants to persuade some receivers without dissuading the others. I present and characterize novel strategies through which the network is exploited. Were receivers' priors homogenous, such strategies would underperform with respect to a public signal. However, when priors are heterogenous, these strategies can prove useful to the sender. In particular, if the average degree of the nodes who should not be dissuaded is sufficiently low, strategies exploiting the network convince more receivers than public signals, conditional on the adverse state realizing. Furthermore, connectivity can be beneficial to the sender, in particular in segregated networks; and strategies exploiting the network perform better when one group is especially hard to persuade. The last chapter offers a different approach: its main objective is to formalize a mechanism and micro-found well-documented behavior. It revisits the diversionary argument of war by proposing a new mechanism: a population that rebels during a conflict weakens the country's military position; this threat discourages the population to attempt a coup. Being at war thus allows a leader to impose demanding policies without being overthrown. I show how rally-around-the-flag reactions to conflict can be both rational and efficient. Furthermore, purely diversionary incentives exist: international tensions can be initiated with the only goal of raising popular support about the conflict. Finally, long-run effects are addressed. When rebellion means are flexible, the population can voluntarily renounce to the freedom to rebel; alternatively, conflicts occur in equilibrium. The strength of the enemy's threat increases the prevalence of barriers to rebellion, while open conflicts are non-monotonically linked to it