Context and Communication

25 Pages Posted: 15 Apr 2024 Last revised: 23 Apr 2024

See all articles by Zachary Wojtowicz

Zachary Wojtowicz

Harvard Graduate School of Arts and Sciences; Harvard Business School

Date Written: March 19, 2024

Abstract

This article develops a formal theory of the relationship between context and communication. We define the context of an interaction to be the sum total of common knowledge shared by the parties involved. Our main theorem shows that context sharply bounds the degree to which interlocutors can flexibly adapt the rules of communication to economize on transmission costs without sacrificing reliability — a contextual refinement of the source coding theorem. We introduce an explicit mathematical procedure for incorporating context into communication that explains why it is both necessary and sufficient to reliably transmit information with maximal efficiency. In doing so, our method provides a novel foundation for the inherent difficulty of writing complete contracts. It also endogenizes communication costs as a function of existing knowledge in firms and other organizations.

Keywords: Communication, Information, Context, Common Knowledge

JEL Classification: D23, D85, D86, D83, D82

Suggested Citation

Wojtowicz, Zachary, Context and Communication (March 19, 2024). Available at SSRN: https://ssrn.com/abstract=4765417 or http://dx.doi.org/10.2139/ssrn.4765417

Zachary Wojtowicz (Contact Author)

Harvard Graduate School of Arts and Sciences ( email )

Littauer Center
1805 Cambridge Street
Cambridge, MA 02138
United States

Harvard Business School ( email )

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