Author(s):
Date of publication: June 2021
Working paper number: 04
Abstract:
This paper provides a model of miscommunication in a common-interest setting. The speaker describes the state with a preexisting language to the decision-maker, whereas using a longer description is more costly. It is shown that, given any non-zero communication cost, any reasonably efficient equilibrium exhibits miscommunication caused by ambiguous descriptions whenever agents communicate across various occasions and their perceptions of occasions are imperfect but sufficiently accurate. Equilibrium miscommunication disappears when agents’ perceptions of occasions are too noisy, suggesting more accurate perceptions do not always reduce miscommunication. The model also provides insight into the miscommunication that triggered a well-known aircraft crash.