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Too Cool for School? Signalling and Countersignalling

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Author Info
Nick Feltovich
Richmond Harbaugh
Ted To

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Abstract

In signalling environments ranging from consumption to education, high-quality senders often shun the standard signals that should separate them from lower-quality senders. We find that allowing for additional, noisy information on sender quality permits equilibria where medium types signal to separate themselves from low types, but high types then choose to not signal or countersignal. High types not only save costs by relying on the additional information to stochastically separate them from low types, but countersignalling itself is a signal of confidence that separates high types from medium types. Experimental results confirm that subjects can learn to countersignal.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 33 (2002)
Issue (Month): 4 (Winter)
Pages: 630-649
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Handle: RePEc:rje:randje:v:33:y:2002:i:winter:p:630-649

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This page was last updated on 2009-11-13.

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