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Too Cool for School? A Theory of Countersignaling

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  • 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. 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.
  2. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  3. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
  4. Quinzii, Martine & Rochet, Jean-Charles, 1985. "Multidimensional signalling," Journal of Mathematical Economics, Elsevier, vol. 14(3), pages 261-284, June.
  5. 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.
  6. Wolfgang Pesendorfer, 1993. "Design Innovation and Fashion Cycles," Discussion Papers 1049, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Engers, Maxim, 1987. "Signalling with Many Signals," Econometrica, Econometric Society, vol. 55(3), pages 663-74, May.
  8. 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.
  9. 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.
  10. 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.
  11. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-61, May.
  12. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  13. 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.
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  1. Big Questions
    by Robin Hanson in Overcoming Bias on 2010-01-10 23:10:52

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