This paper studies a sender-receiver game in which both players want the receiver to choose the state-optimal action. Before observing the state, the sender observes a “contextual signal,” a payoff-irrelevant signal that correlates with states and is imperfectly shared with the receiver. Once the sender observes the state, the sender sends a message to the receiver, incurring a small messaging cost. It is shown that there is no miscommunication in any efficient equilibrium if the messaging cost is uniform or contextual (...) information is poorly shared between players. However, if the messaging costs are different between some messages, and contextual information can affect the probability ranking of states and is shared reasonably well, any efficient equilibrium that favors the sender exhibits miscommunication. Furthermore, the messages that cause miscommunication can be coarse or ambiguous, depending on how well players share contextual information. (shrink)

When an agent’s motivation is sensitive to how his supervisor thinks about the agent’s competence, the supervisor has to take into account both informational and expressive contents of her message to the agent. This paper shows that the supervisor can credibly express her trust in the agent’s ability only by being un- clear about what to do. Suggesting what to do, i.e., “directives,” could reveal the supervisor’s “distrust” and reduce the agent’s equilibrium effort level even though it provides useful information (...) about the decision environment. There is also an equilibrium in which directives are neutral in expressive content. However, it is shown that neologism proofness favors equilibria in which directives are double- edged swords. (shrink)

A decision maker (DM) selects a project from a set of alternatives with uncertain productivity. After the choice, she observes a signal about productivity and decides how much effort to put in. This paper analyzes the optimal decision problem of the DM who rationally filters information to deal with her post-decision cognitive dissonance. It is shown that the optimal effort level for a project can be affected by unchosen projects in her choice set, and the nature of the choice set-dependence (...) is determined by the signal structure. Some comparative statics of choice set-dependence is also provided. Finally, based on the results, the optimal choice set design is also explored. This paper offers a simple framework to explain the experimental finding in psychology that people’s effort level for a project can be enhanced when the project is chosen by themselves rather than by others. (shrink)

Since sending explicit messages can be costly, people often utilize “what is not said,” i.e., informative silence, to economize communication. This paper studies the efficient communication rule, which is fully informative while minimizing the use of explicit messages, in cooperative environments. It is shown that when the notion of context is defined as the finest mutually self-evident event that contains the current state, the efficient use of informative silence exhibits the defining property of indexicals in natural languages. While the efficient (...) use of silence could be complex, it is also found that the efficient use of silence can be as “simple” as the use of indexicals in natural languages if and only if the information structure satisfies some centrality and dominance properties. (shrink)

I investigate the complementarity of behavioral biases in a simple investment problem. The agent has incomplete knowledge about the correlation between fitness and the decision environment. Nature endows the agent with a decision procedure so that the induced action can reflect this correlation. I show that the agent with this decision procedure always exhibits (i) present biased time preference, (ii) distorted beliefs, and (iii) cognitive dissonance. The three biases are complements and the absence of one of them destroys the value (...) of the other two. The decision procedure also provides insights into the non-fungibility of savings. (shrink)