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Signaling and Countersignaling: A Theory of Understatement Author info | Abstract | Publisher info | Download info | Related research | Statistics Nick Feltovich (University of Houston)
Rick Harbaugh (Claremont McKenna College)
Ted To (Bureau of Labor Statistics)
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registered author(s):
In signaling 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 countersignaling itself is a signal of confidence which separates high types from medium types. Experimental results confirm that subjects can learn to countersignal.
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Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number
1999-21.
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Handle: RePEc:clm:clmeco:1999-21Contact details of provider: Postal: 500 E. 9th Street, Claremont, CA 91711 Phone: (909) 607-3041 Fax: (909) 621-8249 Web page: http://www.claremontmckenna.edu/econ/papers/ More information through EDIRC
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Keywords: signaling ; countersignaling ; understatement ; Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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Cho, In-Koo & Sobel, Joel, 1990.
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Ball, Sheryl B. & Bazerman, Max H. & Carroll, John S., 1991.
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Pesendorfer, Wolfgang, 1995.
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Other versions: Stephen A. Ross, 1977.
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Garvin, Susan & Kagel, John H., 1994.
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Spence, A Michael, 1973.
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"Equilibrium Selection in Signaling Games ,"
Econometrica ,
Econometric Society, vol. 55(3), pages 647-61, May.
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Other versions: Kagel, John H & Levin, Dan, 1991.
"The Winner's Curse and Public Information in Common Value Auctions: Reply ,"
American Economic Review ,
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"Competitive signalling ,"
Journal of Economic Theory ,
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Other versions: Harbaugh, William T., 1998.
"What do donations buy?: A model of philanthropy based on prestige and warm glow ,"
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Akerlof, George A, 1970.
"The Market for 'Lemons': Quality Uncertainty and the Market Mechanism ,"
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Quinzii, Martine & Rochet, Jean-Charles, 1985.
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Journal of Mathematical Economics ,
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David J. Cooper & Susan Garvin & John H. Kagel, 1997.
"Signalling and Adaptive Learning in an Entry Limit Pricing Game ,"
RAND Journal of Economics ,
The RAND Corporation, vol. 28(4), pages 662-683, Winter.
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Hans K. Hvide, 2003.
"Education and the Allocation of Talent ,"
Journal of Labor Economics ,
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[Downloadable!]
Prendergast, Canice & Stole, Lars, 1996.
"Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning ,"
Journal of Political Economy ,
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Cho, In-Koo & Kreps, David M, 1987.
"Signaling Games and Stable Equilibria ,"
The Quarterly Journal of Economics ,
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Nelson, Philip, 1974.
"Advertising as Information ,"
Journal of Political Economy ,
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[Downloadable!] (restricted)
Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999.
"Learning in Cournot Oligopoly--An Experiment ,"
Economic Journal ,
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Other versions: Spence, A Michael, 1973.
"Job Market Signaling ,"
The Quarterly Journal of Economics ,
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[Downloadable!] (restricted)
Kathryn E. Spier, 1992.
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RAND Journal of Economics ,
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[Downloadable!] (restricted)
Teoh, Siew Hong & Hwang, Chuan Yang, 1991.
"Nondisclosure and Adverse Disclosure as Signals of Firm Value ,"
Review of Financial Studies ,
Oxford University Press for Society for Financial Studies, vol. 4(2), pages 283-313.
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