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Optimal Communication

Author

Listed:
  • Stephen Morris
  • Hyun Song Shin

Abstract

Optimal communication to a group often entails a trade-off between precision of information conveyed and common understanding (or approximate common knowledge) of the information within the group. We argue that an understanding of this trade-off is central in many contexts, including central bank communication and the design of accounting standards, as well as understanding the design of language itself. (JEL: C72, D83, E52, M41) (c) 2007 by the European Economic Association.

Suggested Citation

  • Stephen Morris & Hyun Song Shin, 2007. "Optimal Communication," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 594-602, 04-05.
  • Handle: RePEc:tpr:jeurec:v:5:y:2007:i:2-3:p:594-602
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    References listed on IDEAS

    as
    1. George-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," American Economic Review, American Economic Association, vol. 94(2), pages 91-98, May.
    2. Camille Cornand & Frank Heinemann, 2008. "Optimal Degree of Public Information Dissemination," Economic Journal, Royal Economic Society, vol. 118(528), pages 718-742, April.
    3. Espahbodi, Hassan & Espahbodi, Pouran & Rezaee, Zabihollah & Tehranian, Hassan, 2002. "Stock price reaction and value relevance of recognition versus disclosure: the case of stock-based compensation," Journal of Accounting and Economics, Elsevier, vol. 33(3), pages 343-373, August.
    4. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    5. Stephen Morris & Hyun Song Shin, 2005. "Central Bank Transparency and the Signal Value of Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2), pages 1-66.
    6. Mary E. Barth & Greg Clinch & Toshi Shibano, 2003. "Market Effects of Recognition and Disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 41(4), pages 581-609, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. George-Marios Angeletos & Luigi Iovino & Jennifer La'O, 2011. "Cycles, Gaps, and the Social Value of Information," Levine's Working Paper Archive 786969000000000293, David K. Levine.
    2. Silvia Sonderegger, 2010. "Centralized Or Decentralized Information: Which Is Better For Providing Incentives?," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 290-305, April.
    3. repec:dpr:wpaper:0908 is not listed on IDEAS
    4. Stephen Morris & Hyun Song Shin, 2008. "Coordinating Expectations in Monetary Policy," Chapters,in: Central Banks as Economic Institutions, chapter 5 Edward Elgar Publishing.
    5. Ahnert, Toni & Bertsch, Christoph, 2013. "A wake-up call: information contagion and strategic uncertainty," Working Paper Series 282, Sveriges Riksbank (Central Bank of Sweden), revised 01 Mar 2014.
    6. Carvalho, Fabia A. & Minella, André, 2012. "Survey forecasts in Brazil: A prismatic assessment of epidemiology, performance, and determinants," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1371-1391.
    7. Marino, Anthony M., 2014. "Transparency in agency: The constant elasticity case and extensions," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 9-21.
    8. Dräger, Lena & Lamla, Michael J. & Pfajfar, Damjan, 2016. "Are survey expectations theory-consistent? The role of central bank communication and news," European Economic Review, Elsevier, vol. 85(C), pages 84-111.
    9. Hüning, Hendrik & Meub, Lukas, 2015. "Optimal public information dissemination: Introducing observational learning into a generalized beauty contest," Center for European, Governance and Economic Development Research Discussion Papers 260, University of Goettingen, Department of Economics.
    10. George-Marios Angeletos & Alessandro Pavan, 2007. "Socially Optimal Coordination: Characterization and Policy Implications," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 585-593, 04-05.
    11. James, Jonathan G. & Lawler, Phillip, 2012. "Heterogeneous information quality; strategic complementarities and optimal policy design," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 342-352.
    12. Myatt, David P. & Wallace, Chris, 2014. "Central bank communication design in a Lucas-Phelps economy," Journal of Monetary Economics, Elsevier, vol. 63(C), pages 64-79.
    13. Baeriswyl, Romain, 2007. "Central Bank's Action and Communication," Discussion Papers in Economics 1381, University of Munich, Department of Economics.
    14. Hüning, Hendrik & Meub, Lukas, 2016. "Optimal public information dissemination: Introducing multiplier effects into a generalized beauty contest," Center for European, Governance and Economic Development Research Discussion Papers 260 [rev.], University of Goettingen, Department of Economics.
    15. Jasmina Arifovic & Janet Hua Jiang, 2014. "Do Sunspots Matter? Evidence from an Experimental Study of Bank Runs," Staff Working Papers 14-12, Bank of Canada.
    16. Hiroki Arato & Tomoya Nakamura, 2013. "Endogenous Alleviation of Overreaction Problem by Aggregate Information Announcement," The Japanese Economic Review, Japanese Economic Association, vol. 64(3), pages 319-336, September.
    17. David O. Lucca & Francesco Trebbi, 2009. "Measuring Central Bank Communication: An Automated Approach with Application to FOMC Statements," NBER Working Papers 15367, National Bureau of Economic Research, Inc.
    18. Augustin Landier & David Thesmar, 2011. "Regulating Systemic Risk through Transparency: Trade-Offs in Making Data Public," NBER Chapters,in: Risk Topography: Systemic Risk and Macro Modeling, pages 31-44 National Bureau of Economic Research, Inc.
    19. Wang, Yun, 2013. "The result of world powers in WTO: A cheap-talk game under different communication protocols," China Economic Review, Elsevier, vol. 27(C), pages 192-207.
    20. Hüning, Hendrik & Meub, Lukas, 2015. "Optimal public information dissemination: Introducing observational learning into a generalized beauty contest," HWWI Research Papers 169, Hamburg Institute of International Economics (HWWI).
    21. Wataru Tamura, 2013. "Optimal Monetary Policy and Transparency under Informational Friction," CARF F-Series CARF-F-329, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    22. George-Marios Angeletos & Chen Lian, 2016. "Forward Guidance without Common Knowledge," NBER Working Papers 22785, National Bureau of Economic Research, Inc.
    23. Shaoping Qiu, 2017. "Atomic Particle and Organization Dynamics," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(1), pages 81-94, January.
    24. Ui, Takashi & Yoshizawa, Yasunori, 2015. "Characterizing social value of information," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 507-535.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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