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Signalling Reversal

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  • Orzach, Ram
  • Tauman, Yair

Abstract

The case of a strong contestant who has no direct way to demonstrate its strength and may have to send a costly signal to prove it appears frequently in the signaling literature. The authors examine what occurs in signaling models with two or more contestants. The receiver of the signal may serve as a credible coordinator who punishes the senders for not collaborating with each other, the result being a separating equilibrium in which the signal sent by the strong contestants, though costly, is also quite rewarding: it increases their payoff level over and above the level attained when their strength is common knowledge. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Orzach, Ram & Tauman, Yair, 1996. "Signalling Reversal," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 453-464, May.
    • Handle: RePEc:ier:iecrev:v:37:y:1996:i:2:p:453-64
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    Cited by:

    1. Daughety, Andrew F. & Reinganum, Jennifer F., 2007. "Competition and confidentiality: Signaling quality in a duopoly when there is universal private information," Games and Economic Behavior, Elsevier, vol. 58(1), pages 94-120, January.
    2. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Imperfect competition and quality signalling," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 163-183, March.
    3. Vollmer, Hendrik, 2016. "Financial numbers as signs and signals: Looking back and moving forward," economic sociology. perspectives and conversations, Max Planck Institute for the Study of Societies, vol. 17(2), pages 32-38.
    4. Cosmas Odo & Wilson Ani & Philip Obialor & David Ugwunta, 2016. "To What Extent do United Kingdom Companies Provide Oil and Gas Reserves Information Sufficient to Satisfy Statement of Recommended Practice Requirements?," Australian Accounting Review, CPA Australia, vol. 26(1), pages 34-44, March.

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