Just published, by Mialon, Hugo M., and Sue H. Mialon. 2013. “Go Figure: The Strategy of Nonliteral Speech.”American Economic Journal: Microeconomics, 5(2): 186-212:
We develop a model of figurative or indirect speech, which may convey a meaning that differs from its literal meaning. The model yields analytical conditions for speech to be figurative in equilibrium and delivers a number of comparative statics results. For instance, it predicts that the likelihood of figurative speech is greater if the benefit to the listener of correctly understanding the speaker is greater. We then apply the model to analyze particular forms of indirect speech, including terseness, irony, and veiled bribery. Interestingly, the model provides a novel argument for the effectiveness of laws that strictly punish attempted bribery.