Presidential address - Costly communication and incentives

This paper discusses the introduction of incentive considerations in a model of costly communication. It starts from a simplified version of a team-theoretic model due to Dessein and Santos (2003), which relates the design of an organization to its adaptiveness to environmental uncertainty. Incentives are introduced in this setting, following an approach developed by Dewatripont and Tirole (2005). Doing so enriches the analysis by allowing for the coexistence of various forms of communication, in particular cheap talk versus costly communication.