Cheap talk and burned money

We augment the standard Crawford-Sobel (1982. Econometrica 50, 1431-1451) m odel of cheap talk communication by allowing the informed party to use both costless and costly messages. The issues on which we focus are the consequ ences for cheap tall signaling of the option to burn money and the circumst ances under which both cheap talk and burned money are used to signal infor mation. Journal of Economic Literature Classification Numbers: C7, D8. (C) 2000 Academic Press.