When information and communication are both costly

I consider environments where an upwardly-biased expert faces both costs of acquiring information and of “transmitting inaccurate information relative to the realized state” (forecasting error) when advising a decision-maker. While existing models study these costs separately, I show that considering them jointly can substantially alter standard results. Introducing costly information acquisition overturns the partial-communication and language-inflation predictions of models with bounded messages and costly communication: equilibrium communication features truth-telling and full transmission of the acquired information. At the same time, communication costs can reverse the structure of optimal information acquisition, shifting from partitions with decreasing interval lengths to partitions with increasing interval lengths when misreporting is sufficiently more costly than acquisition. Finally, information acquisition costs generate an acquisition–transmission dilemma: the expert never acquires information that cannot be credibly communicated, implying that perfect information acquisition is impossible.