Theoretical Economics 16 (2021), 1391–1430
Anton Kolotilin, Hongyi Li
We study a communication game between an informed sender and an uninformed receiver with repeated interactions and voluntary transfers. Transfers motivate the receiver's decision-making and signal the sender's information. Although full separation can always be supported in equilibrium, partial or complete pooling is optimal if the receiver's decision-making is highly responsive to information. In this case, the receiver's decision-making is disciplined by pooling states where she is most tempted to defect.
Keywords: Strategic communication, relational contracts
JEL classification: C73, D82, D83
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