communication

By communication actors transfer >knowledge to other actors via the use of linguistic signs. The fundamental problem of communication is interpretation, because no actor can access internal mental states of other actors. That is, the >meaning of communication is always determined independently by both the sending and receiving actor. Communication, thus, entails the possibility of lies. Furthermore, any kind of action may be interpreted as communication, because consequence and meaning can diverge. That is, any action can be interpreted as communication, intended or not.

In the economic analysis of institutions, the paradigmatic problem of communication is the incompleteness of contracts, which means that the parties cannot communicate all contingent states of the world relevant to the contract. This gives rise to >transaction costs.

However, the limits to contractibility do only refer to referential knowledge, which is communicated via codified language. An important channel of communication is the use of >emotions, because many emotions are based on psychosomatic mechanisms that commit the actors unconditionally to the meaning of the message. This is one of the evolutionary foundations of >reason. This is an important EE modification to the game-theoretic analysis of communication which distinguishes between "costly signalling" (like costly education to signal capabilities) and "cheap talk" which is pure communication. Emotions make communication costly.

In economic systems, communication is governed by >institutions in many respects. One of the most important examples is communication via prices and >money. However, EE always submits that in networks prices are only one of the many channels through which transactions are made possible. Hence, the analysis of>markets will be incomplete if only based on the analysis of the price mechanism.

Basic References
This is a very broad field. You may start out from somewhere:
Communication theory

The standard game theoretic analysis of coimmunication as "cheap talk" is well summarized by
Joseph Farrell and Matthew Rabin, Cheap Talk, in: Journal of Economic Perspectives 10(3), pp. 103-118.

Semantic Field
action
perception   communication   transaction
money