On Information Aggregation in International Alliances

Raghul S Venkatesh (raghul.venkatesh@univ-amu.fr)
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Raghul S Venkatesh: Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE

No 1855, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: I develop a model of strategic communication to study information aggregation in an alliance between multiple players. An alliance exhibits four features: i) imperfect private information among players; ii) substitutability in actions; iii) constraints on the action set; and iv) preference heterogeneity (biases). The main result of the paper derives conditions for full information aggregation within the alliance under a public communication protocol. Full information aggregation ensues as long as players' biases are sufficiently cohesive with respect to the constraints on the action set. When players can (costlessly) choose an action set ex ante, I derive the precise conditions on the minimal action set such that there is full information aggregation. Comparative statics uncovers two sources for the differences in the size of the minimal action set between players: bias over outcomes (preference effect) and degree of interdependency (interdependency effect). The results are discussed in the context of burden sharing incentives during military interventions within NATO.

Pages: 48 pages
Date: 2018-12, Revised 2019-07
New Economics Papers: this item is included in nep-gth
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