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Muddled Information

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  • Alex Frankel
  • Navin Kartik

Abstract

We study a model of signaling in which agents are heterogeneous on two dimensions. An agent's natural action is the action taken in the absence of signaling concerns. Her gaming ability parameterizes the cost of increasing the action. Equilibrium behavior muddles information across dimensions. As incentives to take higher actions increase--due to higher stakes or more manipulable signaling technology--more information is revealed about gaming ability, and less about natural actions. We explore a new externality: showing agents' actions to additional observers can worsen information for existing observers. Applications to credit scoring, school testing, and web searching are discussed.

Suggested Citation

  • Alex Frankel & Navin Kartik, 2019. "Muddled Information," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1739-1776.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/701604
    DOI: 10.1086/701604
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    Cited by:

    1. Gesche, Tobias, 2021. "De-biasing strategic communication," Games and Economic Behavior, Elsevier, vol. 130(C), pages 452-464.
    2. Samuels, Delphine & Taylor, Daniel J. & Verrecchia, Robert E., 2021. "The economics of misreporting and the role of public scrutiny," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    3. Bertomeu, Jeremy & Marinovic, Iván & Terry, Stephen J. & Varas, Felipe, 2022. "The dynamics of concealment," Journal of Financial Economics, Elsevier, vol. 143(1), pages 227-246.
    4. Raymond Deneckere & Sergei Severinov, 2022. "Signalling, screening and costly misrepresentation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(3), pages 1334-1370, August.
    5. Pavesi, Filippo & Scotti, Massimo, 2022. "Good lies," European Economic Review, Elsevier, vol. 141(C).
      • Filippo Pavesi & Massimo Scotti, 2019. "Good Lies," Working Paper Series 39, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    6. Tan, Teck Yong, 2023. "Optimal transparency of monitoring capability," Journal of Economic Theory, Elsevier, vol. 209(C).
    7. Andina-Díaz, Ascensión & García-Martínez, José A., 2023. "Reputation and perverse transparency under two concerns," European Journal of Political Economy, Elsevier, vol. 79(C).

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