Modes of Communication

Modes of Communication∗
Mathias Dewatripont† and Jean Tirole‡ December 7, 2004

Abstract

The paper develops a theory of communication in which the sender’s and receiver’s motivations and abilities to communicate and process information endogenously determine the communication mode and the transfer of knowledge. In contrast with the economic literature, which focuses on the (mostly costless) transmission of soft and hard information, it models communication as a moral-hazard-in-team problem, in which the sender and receiver select persuasion and message elaboration efforts. The paper shows how strategies and outcomes depend on whether the receiver needs to absorb the content in order to act (executive decision-making) or uses the information only in order to assess the merits of alternative decisions (supervisory decision-making). The model is then shown to provide a rich set of insights concerning: (i) the impact of incentive alignment on communication strategies; (ii) the relative influence and the complementarity/substitutability between issue-relevant communication and cues (information that relates to the credibility of the sender rather than to the issue at stake); and (iii) the path-dependency of communication. JEL numbers: D8. Keywords: communication, incentives, cues, message evaluation.

We thank Wouter Dessein, Denis Hilton, Canice Prendergast, Armin Schmutzler, Lucy White, two referees and audiences at various seminars and conferences for helpful discussions and comments. † ECARES (Université Libre de Bruxelles), MIT and CEPR. ‡ IDEI and GREMAQ (UMR 5604 CNRS), Toulouse, CERAS (URA 2036 CNRS), Paris, and MIT.

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Introduction

Communication, whether in organizations, personal relationships, politics or public information campaigns, is one of the most complex and strategic activities of human beings. It may have limited effectiveness for two interacting reasons. The first obstacle to effectiveness is the lack of congruence between the

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