Communication with Endogenous Information Acquisition

Abstract

I develop a theory of communication in which experts need to gather information at a cost before giving advice to decision makers. In contrast with the canonical sender-receiver game in which the sender's information is exogenous and costless, I show that first, the sender always communicates all her information to the receiver in any equilibrium; and second, her advice can be more informative when recommending a decision which is more favorable to her. By applying my model to study organizational design, I find that, paradoxically, both delegating decision rights to the sender as well as monitoring the sender's information acquisition process can decrease her incentive to acquire information.