This paper examines the role of communication in partnerships, particularly in mitigating the problem of hidden action, a key issue in contract theory. The authors use both experimental and theoretical methods to explore how communication can influence behavior and decision-making. They find that communication can significantly affect behavior, contrary to the predictions of classical contract theory. The study focuses on four main questions: whether classical contract theory holds in the lab, whether communication fosters cooperation, what form and content of communication are most effective, and which theories of decision-making can explain the data. The authors test these questions by measuring beliefs about actions and beliefs, and examining the motivational forces that influence subjects. They find that subjects harbor belief-dependent preferences, which can be captured using psychological game theory. Specifically, agents are influenced by guilt aversion, which suggests that statements of intent and resulting expectations play a crucial role in communication's impact on behavior. The paper contributes to the field of behavioral contract theory, which aims to understand partnerships and contracts by incorporating social and psychological considerations. The authors develop a simple model of a partnership and derive experimental games to test various theories of social preferences, including inequity aversion, kindness-based reciprocity, and guilt aversion. They find that communication can affect strategic interaction, particularly when decision-makers are motivated by guilt aversion, where truth-telling can be self-enforcing. The experimental results show that communication significantly increases the likelihood of successful partnerships and high-effort choices. The authors conclude that communication can indeed mitigate the problems of hidden action and enhance cooperation in partnerships.This paper examines the role of communication in partnerships, particularly in mitigating the problem of hidden action, a key issue in contract theory. The authors use both experimental and theoretical methods to explore how communication can influence behavior and decision-making. They find that communication can significantly affect behavior, contrary to the predictions of classical contract theory. The study focuses on four main questions: whether classical contract theory holds in the lab, whether communication fosters cooperation, what form and content of communication are most effective, and which theories of decision-making can explain the data. The authors test these questions by measuring beliefs about actions and beliefs, and examining the motivational forces that influence subjects. They find that subjects harbor belief-dependent preferences, which can be captured using psychological game theory. Specifically, agents are influenced by guilt aversion, which suggests that statements of intent and resulting expectations play a crucial role in communication's impact on behavior. The paper contributes to the field of behavioral contract theory, which aims to understand partnerships and contracts by incorporating social and psychological considerations. The authors develop a simple model of a partnership and derive experimental games to test various theories of social preferences, including inequity aversion, kindness-based reciprocity, and guilt aversion. They find that communication can affect strategic interaction, particularly when decision-makers are motivated by guilt aversion, where truth-telling can be self-enforcing. The experimental results show that communication significantly increases the likelihood of successful partnerships and high-effort choices. The authors conclude that communication can indeed mitigate the problems of hidden action and enhance cooperation in partnerships.