Keysar (1994) suggested that language users fall prey to the "illusory transparency of intention," a phenomenon in which individuals misapply their own privileged knowledge to predict others' interpretations of utterances. In Keysar's experiments, readers sometimes judged story characters' remarks as sarcastic when they, but not the narrative addressees, possessed information (i.e., negative privileged information) in favor of those interpretations. To begin, we replicated Keysar's effect with the original stories (Experiment 1). Experiment 2 added control stories that omitted privileged information and revealed that readers were just as likely to judge remarks as sarcastic with negative privileged information as with no privileged information. Experiment 3 provided evidence that readers were trying to preserve assumptions of cooperativeness and rationality when making their judgments. When stories motivated why characters might wish to conceal their meanings, readers used privileged information appropriately. We conclude that individuals are not misled by privileged knowledge, but that they assume cooperativeness and rationality in what they read.