Creating confusion (Q1995296)

This paper studies a game model where a politician knows the underlying state of the world and a continuum of citizens share a common prior and receive idiosyncratic signals about the state. Citizens want to take an action that is appropriate for the sate and the politician seeks to prevent them from doing so. It is assumed that quadratic preferences and normal priors and signal distributions are used. The linear equilibria where the citizens' strategies a re linear functions of their signals are considered. It is proved that the model has a unique linear equilibrium. The citizens' signals are unbiased in the equilibrium but they are made endogenously noisier by the politician's manipulation. It is shown that if the intrinsic precision of information is high there exists a threshold for the cost of manipulation. It is revealed that the net effect of the social media revolution hinges on the size of the reduction in the cost of manipulation. Two further extensions have been considered. In the first extension, citizens consume media reports produced by journalists that have their preferences. In the second extension, citizens can posses heterogeneous priors and the politician can directly manipulate the signal mean as well as the variance.