Essays on the Economics of Communication

Chapter 1 studies the tradeoff of knowledge generation and information flow in organizations, and explains why many modern firms choose to replace corporate meetings with one-on-one communication. In a theoretical model we compare the efficiency of employee communication during a meeting with the efficiency during a pairwise one-on-one communication. The quality of information transmission between agents depends on the accuracy of active communication (talking) and the accuracy of passive communication (listening), which is costly for the agents and is selected prior to communication. In addition, before the communication stage, all agents choose how much to invest in the precision of their private information. We find that meetings make the communication more precise and less costly; however, they have an undesirable effect of reducing incentives for the agents to invest in obtaining their own information. If a firm cannot commit to an optimal communication policy ex-ante, the agents will underinvest in information acquisition and the firm will have to compensate with a larger frequency of meetings. Thus we obtain an inefficiently high equilibrium frequency of meetings due to the lack of commitment by the firms. Chapter 2 provides an explanation for why many organizations are concerned with “e-mail overload” and implement policies to restrict the use of e-mail in the office. In a theoretical model we formalize the tradeoff between increased productivity from high priority communication and reduced productivity due to distractions caused by low priority e-mails. We consider employees with present-biased preferences as well as time consistent employees. All present-biased employees ex-ante are motivated to read only important email, but in the interim some agents find the temptation to read all e-mail in their inbox too high, and as a result suffer from productivity losses. A unique aspect of this paper is the social nature of procrastination, which is a key to the e-mail overload phenomenon. In considering the firm’s policies to reduce the impact of e-mail overload we conclude that a firm is more likely to restrict e-mail in the case of employees with hyperbolic preferences than in the case of time-consistent employees. Chapter 3 is joint work with Marco Battaglini. We examine strategic information transmission in a controlled laboratory experiment of a cheap talk game with one sender and