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Too Cool for School? A Theory of Countersignaling

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Author Info

  • Nick Feltovich

    (University of Houston)

  • Rick Harbaugh

    (Yale University)

  • Ted To

    (University of Warwick)

Abstract

In sender--receiver games high--quality types can distinguish themselves from low--quality types by sending a costly signal. Allowing for additional, noisy information on sender types can radically alter sender behavior in such games. We examine equilibria where medium types separate themselves from low types by signaling, but high types then differentiate themselves from medium types by not signaling, or countersignaling. High types not only save the cost of signaling by relying on the additional information to stochastically separate them from low types, but in doing so they separate themselves from the signaling medium types. Hence they may countersignal even when signaling is a productive activity. To evaluate this theory we report on a two-- cell experiment in which the unique Nash equilibrium of one cell involves countersignaling by high types. Experimental results confirm that subjects can learn to countersignal.

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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 9811002.

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Date of creation: 07 Nov 1998
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Handle: RePEc:wpa:wuwpga:9811002

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  1. Pesendorfer, Wolfgang, 1995. "Design Innovation and Fashion Cycles," American Economic Review, American Economic Association, vol. 85(4), pages 771-92, September.
  2. Harbaugh, William T., 1998. "What do donations buy?: A model of philanthropy based on prestige and warm glow," Journal of Public Economics, Elsevier, vol. 67(2), pages 269-284, February.
  3. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  4. Kathryn E. Spier, 1992. "Incomplete Contracts and Signalling," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 432-443, Autumn.
  5. Engers, Maxim, 1987. "Signalling with Many Signals," Econometrica, Econometric Society, vol. 55(3), pages 663-74, May.
  6. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  7. Spence, Michael, 1974. "Competitive and optimal responses to signals: An analysis of efficiency and distribution," Journal of Economic Theory, Elsevier, vol. 7(3), pages 296-332, March.
  8. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December.
  9. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
  10. Stephen A. Ross, 1977. "The Determination of Financial Structure: The Incentive-Signalling Approach," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 23-40, Spring.
  11. Banks, Jeffrey S. & Sobel, Joel., 1985. "Equilibrium Selection in Signaling Games," Working Papers 565, California Institute of Technology, Division of the Humanities and Social Sciences.
  12. Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, vol. 50(2), pages 381-413, April.
  13. Spence, A Michael, 1973. "Time and Communication in Economic and Social Interaction," The Quarterly Journal of Economics, MIT Press, vol. 87(4), pages 651-60, November.
  14. Quinzii, Martine & Rochet, Jean-Charles, 1985. "Multidimensional signalling," Journal of Mathematical Economics, Elsevier, vol. 14(3), pages 261-284, June.
  15. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
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  1. Big Questions
    by Robin Hanson in Overcoming Bias on 2010-01-10 23:10:52

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