Conveying information in a false or indirect manner in consideration of listeners' wants (i.e., being polite) seemingly contradicts an important goal of a cooperative speaker: information transfer. We propose that a cooperative speaker considers both "epistemic utility," or utility of providing the listener new information, and "social utility," or utility of maintaining or boosting the listener's self-image (being polite). We formalize this tradeoff within a probabilistic model of language understanding and test it with empirical data on people's inferences about the relation between a speaker's goals, utterances and the true states of the world.