Communication through ordinary talk is very common. Often, the receiver of information has the option to investigate a sender’s type. We extend a standard cheap-talk model by giving the receiver this option. We show that when the receiver bears most of the investigation cost, the option to investigate drives away most cheap-talk communication.
When the sender pays a substantial part of the investigation cost, the option to investigate disciplines the sender. Introducing an investigation device to a cheap-talk model demonstrates the vulnerability of cheap talk on the one hand, and shows how communication can be improved on the other.

Cheap talk, Costly state verification,
Journal of Economic Behavior & Organization
Erasmus School of Economics

Bijkerk, S.H, Karamychev, V.A, & Swank, O.H. (2018). When Words are not Enough. Journal of Economic Behavior & Organization, 149, 294–314. doi:10.1016/j.jebo.2018.03.009