IDEAS home Printed from https://ideas.repec.org/p/hol/holodi/0912.html
   My bibliography  Save this paper

Signaling in Deterministic and Stochastic Settings

Author

Listed:
  • Thomas D. Jeitschko

    (Department of Economics, Michigan State University)

  • Hans-Theo Normann

    (Department of Economics, Goethe University Frankfurt)

Abstract

We contrast a standard deterministic signaling game with one where the signal-generating mechanism is stochastic. With stochastic signals a unique equilibrium emerges that involves separation and has intuitive comparative-static properties as the degree of signaling depends on the prior type distribution. With deterministic signals both pooling and separating configurations occur. Laboratory data support the theory: In the stochastic variant, there is more signaling behavior than with deterministic signals, and less frequent types distort their signals relatively more. Moreover, the degree of congruence between equilibrium and subject behavior is greater in stochastic settings compared to deterministic treatments.

Suggested Citation

  • Thomas D. Jeitschko & Hans-Theo Normann, 2009. "Signaling in Deterministic and Stochastic Settings," Royal Holloway, University of London: Discussion Papers in Economics 09/12, Department of Economics, Royal Holloway University of London.
    • Handle: RePEc:hol:holodi:0912
    as

    Download full text from publisher

    File URL: http://www.rhul.ac.uk/economics/Research/WorkingPapers/pdf/dpe0912.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Carlsson, Hans & Dasgupta, Sudipto, 1997. "Noise-Proof Equilibria in Two-Action Signaling Games," Journal of Economic Theory, Elsevier, vol. 77(2), pages 432-460, December.
    2. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
    3. Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
    4. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-538, June.
    5. Potters, Jan & van Winden, Frans, 1996. "Comparative Statics of a Signaling Game: An Experimental Study," International Journal of Game Theory, Springer;Game Theory Society, vol. 25(3), pages 329-353.
    6. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
    7. Miller, Ross M & Plott, Charles R, 1985. "Product Quality Signaling in Experimental Markets," Econometrica, Econometric Society, vol. 53(4), pages 837-872, July.
    8. Kübler, Dorothea & Müller, Wieland & Normann, Hans-Theo, 2008. "Job-market signaling and screening: An experimental comparison," Games and Economic Behavior, Elsevier, vol. 64(1), pages 219-236, September.
    9. Sheremeta, Roman M., 2010. "Experimental comparison of multi-stage and one-stage contests," Games and Economic Behavior, Elsevier, vol. 68(2), pages 731-747, March.
    10. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    11. Ashenfelter, Orley, et al, 1992. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," Econometrica, Econometric Society, vol. 60(6), pages 1407-1433, November.
    12. Fonseca, Miguel A., 2009. "An experimental investigation of asymmetric contests," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 582-591, September.
    13. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-239, March.
    14. Jeffrey M. Wooldridge, 2003. "Cluster-Sample Methods in Applied Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 133-138, May.
    15. Harrison, Glenn W, 1989. "Theory and Misbehavior of First-Price Auctions," American Economic Review, American Economic Association, vol. 79(4), pages 749-762, September.
    16. Brandts, Jordi & Holt, Charles A, 1993. "Adjustment Patterns and Equilibrium Selection in Experimental Signaling Games," International Journal of Game Theory, Springer;Game Theory Society, vol. 22(3), pages 279-302.
    17. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
    18. David J. Cooper & John H. Kagel, 2009. "The Role of Context and Team Play in Cross-Game Learning," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 1101-1139, September.
    19. Matthews, Steven A & Mirman, Leonard J, 1983. "Equilibrium Limit Pricing: The Effects of Private Information and Stochastic Demand," Econometrica, Econometric Society, vol. 51(4), pages 981-996, July.
    20. 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.
    21. Cooper, David J., 2008. "Learning in Entry Limit Pricing Games," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 64, pages 585-597, Elsevier.
    22. Bradley Ruffle & Richard Sosis, 2003. "Religious ritual and cooperation: Testing for a relationship on israeli religious and secular kibbutzim," Artefactual Field Experiments 00103, The Field Experiments Website.
    23. Mark N. Hertzendorf, 1993. "I'm Not a High-Quality Firm -- But I Play One on TV," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 236-247, Summer.
    24. David J. Cooper & John H. Kagel, 2005. "Are Two Heads Better Than One? Team versus Individual Play in Signaling Games," American Economic Review, American Economic Association, vol. 95(3), pages 477-509, June.
    25. de Haan, Thomas & Offerman, Theo & Sloof, Randolph, 2011. "Noisy signaling: Theory and experiment," Games and Economic Behavior, Elsevier, vol. 73(2), pages 402-428.
    26. Cooper, David J & Garvin, Susan & Kagel, John H, 1997. "Adaptive Learning vs. Equilibrium Refinements in an Entry Limit Pricing Game," Economic Journal, Royal Economic Society, vol. 107(442), pages 553-575, May.
    27. Brandts, Jordi & Holt, Charles A, 1992. "An Experimental Test of Equilibrium Dominance in Signaling Games," American Economic Review, American Economic Association, vol. 82(5), pages 1350-1365, December.
    28. Jennifer F. Reinganum & Louise L. Wilde, 1986. "Settlement, Litigation, and the Allocation of Litigation Costs," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 557-566, Winter.
    29. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Catherine Gendron-Saulnier & Marc Santugini, 2013. "The Informational Benefit of Price Discrimination," Cahiers de recherche 13-02, HEC Montréal, Institut d'économie appliquée.
    2. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, vol. 115(1), pages 7-10.
    3. Bos, Olivier & Gomez-Martinez, Francisco & Onderstal, Sander & Truyts, Tom, 2021. "Signalling in auctions: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 448-469.
    4. Krautheim, Sebastian & Verdier, Thierry, 2016. "Offshoring with endogenous NGO activism," Journal of International Economics, Elsevier, vol. 101(C), pages 22-41.
    5. Tingting Nian & Arun Sundararajan, 2022. "Social Media Marketing, Quality Signaling, and the Goldilocks Principle," Information Systems Research, INFORMS, vol. 33(2), pages 540-556, June.
    6. Miguel A. Fonseca & Francesco Giovannoni & Miltiadis Makris, 2020. "Auctions with external incentives: experimental evidence," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(4), pages 1003-1043, December.
    7. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Clémence Christin, 2013. "Entry Deterrence Through Cooperative R&D Over-Investment," Recherches économiques de Louvain, De Boeck Université, vol. 79(2), pages 5-26.
    9. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-23, June.
    10. Timothy N. Cason & Alex Tabarrok & Robertas Zubrickas, 2024. "Signaling Quality: How Refund Bonsues Can Overcome Information Asymmetries in Crowdfunding," Purdue University Economics Working Papers 1339, Purdue University, Department of Economics.
    11. Pecorino Paul & Van Boening Mark, 2019. "Costly Voluntary Disclosure in a Signaling Game," Review of Law & Economics, De Gruyter, vol. 15(2), pages 1-32, July.
    12. Mirman, Leonard J. & Salgueiro, Egas M. & Santugini, Marc, 2014. "Noisy signaling in monopoly," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 504-511.
    13. Olivella, Pau & Siciliani, Luigi, 2017. "Reputational concerns with altruistic providers," Journal of Health Economics, Elsevier, vol. 55(C), pages 1-13.
    14. Ennio Bilancini & Leonardo Boncinelli, 2014. "Small Noise in Signaling Selects Pooling on Minimum Signal," Center for Economic Research (RECent) 101, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kübler, Dorothea & Müller, Wieland & Normann, Hans-Theo, 2008. "Job-market signaling and screening: An experimental comparison," Games and Economic Behavior, Elsevier, vol. 64(1), pages 219-236, September.
    2. de Haan, Thomas & Offerman, Theo & Sloof, Randolph, 2011. "Noisy signaling: Theory and experiment," Games and Economic Behavior, Elsevier, vol. 73(2), pages 402-428.
    3. Kübler, D. & Müller, W. & Normann, H.T., 2008. "Job-market signalling and screening : An experimental study," Other publications TiSEM e60074dd-75cb-47df-965c-a, Tilburg University, School of Economics and Management.
    4. Dominiak, Adam & Lee, Dongwoo, 2023. "Testing rational hypotheses in signaling games," European Economic Review, Elsevier, vol. 160(C).
    5. Ennio Bilancini & Leonardo Boncinelli, 2014. "Small Noise in Signaling Selects Pooling on Minimum Signal," Center for Economic Research (RECent) 101, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    6. Cooper, David J. & Kagel, John H., 2003. "The impact of meaningful context on strategic play in signaling games," Journal of Economic Behavior & Organization, Elsevier, vol. 50(3), pages 311-337, March.
    7. Cooper, David J. & Kagel, John H., 2009. "Equilibrium selection in signaling games with teams: Forward induction or faster adaptive learning?," Research in Economics, Elsevier, vol. 63(4), pages 216-224, December.
    8. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2015. "Privacy concerns, voluntary disclosure of information, and unraveling: An experiment," European Economic Review, Elsevier, vol. 75(C), pages 43-59.
    9. Daley, Brendan & Green, Brett, 2014. "Market signaling with grades," Journal of Economic Theory, Elsevier, vol. 151(C), pages 114-145.
    10. repec:hum:wpaper:sfb649dp2013-040 is not listed on IDEAS
    11. Thomas de Haan & Theo Offerman & Randolph Sloof, 2015. "Money Talks? An Experimental Investigation Of Cheap Talk And Burned Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1385-1426, November.
    12. Sibert, Anne, 2002. "Monetary policy with uncertain central bank preferences," European Economic Review, Elsevier, vol. 46(6), pages 1093-1109, June.
    13. Jacob K. Goeree & Charles A. Holt, 2001. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," American Economic Review, American Economic Association, vol. 91(5), pages 1402-1422, December.
    14. Moraga-Gonzalez, Jose Luis, 2000. "Quality uncertainty and informative advertising," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 615-640, May.
    15. Kaya, Ayça, 2009. "Repeated signaling games," Games and Economic Behavior, Elsevier, vol. 66(2), pages 841-854, July.
    16. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2022. "Behavioral Forces Driving Information Unraveling," Rationality and Competition Discussion Paper Series 354, CRC TRR 190 Rationality and Competition.
    17. Ki, Hyoshin & Kim, Jeong-Yoo, 2022. "Sell green and buy green: A signaling theory of green products," Resource and Energy Economics, Elsevier, vol. 67(C).
    18. Nathan Berg & Jeong‐Yoo Kim & Ilgyun Seon, 2021. "A performance‐based payment: Signaling the quality of a credence good," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(5), pages 1117-1131, July.
    19. Church, Bryan K. & Peytcheva, Marietta & Yu, Wei & Singtokul, Ong-Ard, 2015. "Perspective taking in auditor–manager interactions: An experimental investigation of auditor behavior," Accounting, Organizations and Society, Elsevier, vol. 45(C), pages 40-51.
    20. Espínola-Arredondo, Ana & Gal-Or, Esther & Muñoz-García, Félix, 2011. "When should a firm expand its business?," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 729-745.
    21. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2023. "Behavioral forces driving information unraveling," Discussion Papers, Research Unit: Market Behavior SP II 2023-207, WZB Berlin Social Science Center.

    More about this item

    Keywords

    experiments; noise; signalling; learning; stochastic environments.;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hol:holodi:0912. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Claire Blackman (email available below). General contact details of provider: http://www.rhul.ac.uk/economics/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.