Strategic Communication with Reporting Costs

Emons, Winand; Fluet, Claude (2019). Strategic Communication with Reporting Costs. Theory and Decision, 87(3), pp. 341-363. Springer 10.1007/s11238-019-09709-4

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A decision maker relies on information of parties affected by her decision. These parties try to influence her decision by selective disclosure of facts. As is well known from the literature, competition between the informed parties constrains their ability to manipulate information. We depart from this literature by introducing a cost to communicate. Our parties trade off their reporting cost against the effect on the decision. Some information is never revealed. In contrast to setups without communication costs, our decision maker can benefit by ex ante committing to an ex post suboptimal decision rule. Moreover, committing ex ante not to listen to one of the parties may also be beneficial for the decision maker.

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