DP14672 A Political Model of Trust

Author(s): Marina Agranov, Ran Eilat, Konstantin Sonin
Publication Date: April 2020
Date Revised: February 2021
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 model of political competition, in which the uninformed median voter chooses whether to follow or ignore the advice of the elite that forms endogenously to aggregate information. In equilibrium, information transmission is possible only if voters trust the elite's endorsement of potentially biased candidates. When inequality is high, the elite's 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 elite size and thus the extent of information aggregation depends on the amount of trust they can maintain.