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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
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    2. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, vol. 115(1), pages 7-10.
    3. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2025. "Information unraveling and limited depth of reasoning," Games and Economic Behavior, Elsevier, vol. 154(C), pages 267-284.
    4. Timothy N. Cason & Alex Tabarrok & Robertas Zubrickas, 2025. "Signaling Quality: How Refund Bonuses Can Overcome Information Asymmetries in Crowdfunding," Management Science, INFORMS, vol. 71(7), pages 5933-5947, July.
    5. 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.
    6. Krautheim, Sebastian & Verdier, Thierry, 2016. "Offshoring with endogenous NGO activism," Journal of International Economics, Elsevier, vol. 101(C), pages 22-41.
    7. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2025. "Information unraveling and limited depth of reasoning," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 154, pages 267-284.
    8. 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.
    9. Clémence Christin, 2013. "Entry Deterrence Through Cooperative R&D Over-Investment," Recherches économiques de Louvain, De Boeck Université, vol. 79(2), pages 5-26.
    10. Olivella, Pau & Siciliani, Luigi, 2017. "Reputational concerns with altruistic providers," Journal of Health Economics, Elsevier, vol. 55(C), pages 1-13.
    11. 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.
    12. 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".
    13. Catherine Gendron-Saulnier & Marc Santugini, 2013. "The Informational Benefit of Price Discrimination," Cahiers de recherche 13-02, HEC Montréal, Institut d'économie appliquée.
    14. 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.
    15. 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.
    16. 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).
    17. Ishida, Junichiro & Suen, Wing, 2024. "Pecuniary emulation and invidious distinction: Signaling under behavioral diversity," Games and Economic Behavior, Elsevier, vol. 147(C), pages 449-459.
    18. 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.

    More about this item

    Keywords

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    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

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