Who Do You Want to Talk to? Theory and Experiment of Network Formation under Strategic Information Transmission

We combine network formation and information transmission in a simple model and predict that people reveal less information when talking to those with a different identity. Furthermore, individuals prefer to talk to people with the same identity when there is a greater incentive to collect information, while individuals prefer to talk to people with different identity when there is a greater incentive to influence. Our experiment supports the direction of these predictions and suggests the following behavioral patterns. 1) The majority of individuals choose to talk to individuals with the same identity unless the incentive to influence is extremely high. 2) People are influenced by the messages from those who are different even though babbling is the only equilibrium. 3) While people lie more when the incentive of influencing is stronger, they are much more truthful to individuals with a different identity than the theory predicts