A note on cheap talk and burned money

Austen-Smith and Banks (Journal of Economic Theory, 2000) study how money burning can expand the set of pure cheap talk equilibria of Crawford and Sobel (Econometrica, 1982). I identify an error in the main Theorem of Austen-Smith and Banks, and provide a variant that preserves some of the important implications. I also prove that cheap talk can be influential with money burning if and only if it can be influential without money burning. This strengthens a result of Austen-Smith and Banks, but uncovers other errors in their analysis. Finally, an open conjecture of theirs is proved correct.