Relational Communication with Transfers

48 Pages Posted: 1 Mar 2018

See all articles by Anton Kolotilin

Anton Kolotilin

University of New South Wales (UNSW)

Hongyi Li

UNSW Australia Business School, School of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: March 1, 2018

Abstract

We enrich a cheap-talk game between an informed sender and an uninformed receiver by adding repeated interactions and voluntary transfer payments. Transfers play two roles here: they 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 too responsive to information. In this case, the receiver’s decision-making is disciplined by pooling extreme states, where she is most tempted to defect. In characterizing optimal equilibria, we establish new results on monotone persuasion.

Keywords: strategic communication, monotone persuasion, relational contracts

JEL Classification: C73, D82, D83

Suggested Citation

Kolotilin, Anton and Li, Hongyi, Relational Communication with Transfers (March 1, 2018). UNSW Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=3132368 or http://dx.doi.org/10.2139/ssrn.3132368

Anton Kolotilin (Contact Author)

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

Hongyi Li

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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