Intelligence Sharing and International Alliances∗

Information sharing to achieve a foreign policy objective is an important feature of modern day alliances between countries. We develop a model of strategic communication to study information aggregation within an alliance. In an alliance, i) there is public communication (cheap talk) of private information by members; ii) the actions of players are strategic substitutes; iii) there are resource constraints on actions; and, iv) members have heterogeneous preferences over final outcomes. Our analysis uncovers a novel incentive for information aggregation – the extent of resource constraints on alliance members. Specifically, truthful information sharing depends on the size of bounds on each players’ action space. We show that public communication protocol can support information aggregation as long as preferences of alliance members are sufficiently cohesive with respect to the bounds on actions. We derive a precise characterization of cohesiveness within an alliance as a function of the biases and the resource constraints of alliance members. Further, our theory provides an informational rationale for alliance formation between countries.