Relational communication

Abstract

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.