Paper 1204
Mass Media and Constrained Communication
Author: Maksymilian Kwiek (University of Southampton)
Abstract
This paper studies how a sender optimally communicates information to receivers when communication is coarse, but the sender's interests are aligned with those of the receivers. Results from information theory, based on the notion of mutual information, are used to derive equilibria characterising monopolistic behaviour in this constrained communication model. The main finding is that when communication constraints are present, the correlation between receivers actions is typically greater than in a frictionless environment. If constraints are severe enough, the correlation is one. The result appears to be robust to different specification of industrial structure and suggests a theoretical background to studies of mass media as a source of herding or contagion.