DP14672 A Political Model of Trust

Author(s): Marina Agranov, Ran Eilat, Konstantin Sonin
Publication Date: April 2020
Keyword(s): cheap talk, inequality, information club, political economy, Trust
JEL(s): D72, D83
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14672

We analyze a simple model of political competition, in which the uninformed median voter chooses whether to follow or ignore the advice of the informed elites. In equilibrium, information transmission is possible only if voters trust the elites' endorsement of potentially biased candidates. When inequality is high, the elites' informational advantage is minimized by the voters' distrust. When inequality reaches a certain threshold, the trust, and thus the information transmission, breaks down completely. Finally, the size of the elite forming in equilibrium depends on the amount of trust they are able to maintain.