I examine a setting, where an information sender conducts research into a payoff-relevant state variable, and releases information to agents, who consider joining a coalition. The agents' actions can cause harm by contributing to a public bad. The sender, who has commitment power, by designing an information mechanism (a set of signals and a probability distribution over them), maximises his payoff, which depends on the action taken by the agents, and the state variable. I derive the optimal information mechanism from the general set of public information mechanisms, in coalition formation games. I show that the coalition size, as a function of beliefs of agents, is an endogenous variable, induced by the information sender. I also apply the results to International Environmental Agreements (IEAs), where a central authority, as an information sender, attempts to reduce the global level of greenhouse gases(GHG) by communication of information on social cost of GHG.
The Economic Theory Lunchtime Workshops are convened by Meg Meyer.