research@hec - Issue #20 - (Page VI)

How is Information Transmitted? Tristan Tomala Communication Networks research Theories of mechanism design are based on the revelation principle, which demonstrates that it is possible to build a process wherein each person is invited to clearly articulate his or her preference to the decision maker in a given situation. The decision maker can then collect this information and ultimately make a decision. But, as Tomala notes, “while this principle is appealing in theory, it assumes that each actor has the opportunity to communicate directly with the decision maker. In practice, in a company for example, not all employees can communicate directly with the CEO in a face-to-face conversation in his or her office. Direct and secure communication is very rare; even an email is not a direct interaction—the information goes through a server first!” It is thus difficult for the decision maker to be sure that information is reliable. combine theories from economics and computer science to identify the without being distorted or falsified. What specific properties must a network have to allow optimal communication between agents and a decision maker? Tristan Tomala and Ludovic Renou mechanisms that allow information to be transmitted to the decision maker hec BIOGRAPHY Since 2007, Tristan Tomala has been a professor at HEC, where he teaches business economics, game theory, and mathematics. He was previously a lecturer at Paris Dauphine University. His research focuses on game theory, particularly its dynamic and informational aspects. Tomala is also associate editor for the International Journal of Game Theory, Theory and Decision, and Dynamic Games and Applications. He holds a Ph.D. in applied mathematics from Paris I University, SOCIAL CHOICE FUNCTIONS Tomala explains that while the decision maker’s final choice depends on information collected from individuals, this information generally differs depending on how people are consulted. According to the theory of social choice, these rules (or social choice functions) act as an incentive when it is in agents’ interest to reveal their true preference. Thus, if several colleagues decide to buy a coffee machine for their open space, asking each person to pay a fee each time they use the machine is a better incen- DEFINING THE RIGHT RULES OF THE GAME What are the necessary conditions for a communication network to enable the implementation of such incentive-providing functions? Based on information system theory, Tomala and Renou developed a visual representation of the communication network where each agent is a node with links to other agents. If there is a path of links (or “edges”) between two nodes, then the network is said to be connected. A 1-connected network has at least one path of links between a given pair of agents, a 2connected network has two such paths, and so on. Tomala and Renou look at directed networks, wherein the communication links run in a specific direction. The network is said to be strongly connected if it is possible to go from one node to another by following the direction of the links (information circulates in several directions, going up toward the decision maker or trickling down to other agents). The network is weakly connected if it is possible to move between any two nodes while disregarding tive than dividing the price of the machine among the people who have said that they want to use it. In the latter case, everyone is better off saying that they don’t plan to make any coffee! If the decision maker has to make decisions based on the information collected, he or she will thus seek to adopt social choice functions that provide agents with an incentive to reveal their true preferences. VI research@hec • April-May 2011

Table of Contents for the Digital Edition of research@hec - Issue #20

Cover & Contents
LBOs: Job Creators and Growth Stimulants?
Inventors and the Market: A Profit-seeking Behavior
Communication Networks How is Information Transmitted?
HEC PARIS Publishing News

research@hec - Issue #20