This paper examines how communication within a partnership can mitigate the problem of hidden action, a key issue in contract theory. The authors investigate whether communication influences behavior, what form and content communication takes, and which decision-making models can explain the impact of communication. They find that agents have belief-dependent preferences that can be captured using psychological game theory, particularly through guilt aversion. This suggests that communication can influence behavior by shaping beliefs and expectations, which in turn affect decisions. The study also highlights the importance of understanding the motivational forces behind behavior, which is crucial for developing behavioral contract theory. The paper presents an experimental and theoretical analysis of how communication affects cooperation in partnerships. It considers a simple model of a partnership where a principal and an agent consider forming a partnership. The agent's effort and the principal's wage are key variables, and the project can result in either failure or success. The authors derive a benchmark model and examine how communication influences the agent's effort and the principal's decision to form a partnership. The study finds that communication can significantly influence behavior, with agents more likely to exert high effort when they receive messages that include statements of intent. The results show that communication increases the likelihood of successful partnerships, as evidenced by higher rates of agents choosing to roll a die and principals accepting contracts. The authors also find that guilt aversion plays a key role in explaining the impact of communication, as agents are more likely to act in a way that aligns with the expectations of others. The paper concludes that communication can play a crucial role in partnerships and contracts, and that understanding the motivational forces behind behavior is essential for developing behavioral contract theory. The study provides insights into how communication can influence decision-making and cooperation, and highlights the importance of considering social preferences and psychological factors in economic analysis.This paper examines how communication within a partnership can mitigate the problem of hidden action, a key issue in contract theory. The authors investigate whether communication influences behavior, what form and content communication takes, and which decision-making models can explain the impact of communication. They find that agents have belief-dependent preferences that can be captured using psychological game theory, particularly through guilt aversion. This suggests that communication can influence behavior by shaping beliefs and expectations, which in turn affect decisions. The study also highlights the importance of understanding the motivational forces behind behavior, which is crucial for developing behavioral contract theory. The paper presents an experimental and theoretical analysis of how communication affects cooperation in partnerships. It considers a simple model of a partnership where a principal and an agent consider forming a partnership. The agent's effort and the principal's wage are key variables, and the project can result in either failure or success. The authors derive a benchmark model and examine how communication influences the agent's effort and the principal's decision to form a partnership. The study finds that communication can significantly influence behavior, with agents more likely to exert high effort when they receive messages that include statements of intent. The results show that communication increases the likelihood of successful partnerships, as evidenced by higher rates of agents choosing to roll a die and principals accepting contracts. The authors also find that guilt aversion plays a key role in explaining the impact of communication, as agents are more likely to act in a way that aligns with the expectations of others. The paper concludes that communication can play a crucial role in partnerships and contracts, and that understanding the motivational forces behind behavior is essential for developing behavioral contract theory. The study provides insights into how communication can influence decision-making and cooperation, and highlights the importance of considering social preferences and psychological factors in economic analysis.