Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: Networks, Organizations and Firms D09-V2
We study private communication in social networks prior to a majority vote on two alternative policies. Some (or all) agents receive a private imperfect signal about which policy is correct. They can, but need not, recommend a policy to their neighbors in the social network prior to the vote. We show that communication can undermine effciency of the vote and hence reduce welfare in a common interest setting. We test the model in a lab experiment and find strong support for the predicted effects.