Signaling with Costly Acquisition of Signals
In this paper we identify a novel reason why signaling may fail to separate types, which is specific to cases where the receiver has to incur a cost to acquire the signal sent by the sender. If the receiver chooses not to incur the acquisition cost, then all sender's types find it optimal to pool on the least costly signal; also, if all sender's types pool on the least costly signal, then the receiver finds it optimal not to incur the acquisition cost. This kind of coordination failure makes the resulting pooling equilibrium extremely robust, even when costs of signal acquisition are very small. Also, pooling is shown to be robust to all refinements based on out-of-equilibrium beliefs, even when the sender can engage in further signaling that can act as an "invitation" to acquire the main signal, and when acquisition costs are smooth and depend on the receiver's effort to acquire the signal. These results provide a new source of interest in pooling equilibria.
|Date of creation:||Jun 2014|
|Contact details of provider:|| Web page: http://www.recent.unimore.it/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ennio Bilancini & Leonardo Boncinelli, 2014.
"Persuasion with Reference Cues and Elaboration Costs,"
Working Papers - Economics
wp2014_04.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
- Ennio Bilancini & Leonardo Boncinelli, 2014. "Persuasion with Reference Cues and Elaboration Costs," Center for Economic Research (RECent) 102, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
- Shi, Xianwen, 2012.
"Optimal auctions with information acquisition,"
Games and Economic Behavior,
Elsevier, vol. 74(2), pages 666-686.
- Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2006. "Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model," American Economic Review, American Economic Association, vol. 96(4), pages 1043-1068, September.
- In-Koo Cho & David M. Kreps, 1997.
"Signaling Games and Stable Equilibria,"
Levine's Working Paper Archive
896, David K. Levine.
- Andrew Caplin & Mark Dean, 2014.
"Revealed Preference, Rational Inattention, and Costly Information Acquisition,"
NBER Working Papers
19876, National Bureau of Economic Research, Inc.
- Andrew Caplin & Mark Dean, 2015. "Revealed Preference, Rational Inattention, and Costly Information Acquisition," American Economic Review, American Economic Association, vol. 105(7), pages 2183-2203, July.
- 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".
- 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.
- Banks, Jeffrey S. & Sobel, Joel., 1985.
"Equilibrium Selection in Signaling Games,"
565, California Institute of Technology, Division of the Humanities and Social Sciences.
- Mathias Dewatripont & Jean Tirole, 2005.
"Modes of Communication,"
Journal of Political Economy,
University of Chicago Press, vol. 113(6), pages 1217-1238, December.
- Qingmin Liu, 2011. "Information Acquisition and Reputation Dynamics," Review of Economic Studies, Oxford University Press, vol. 78(4), pages 1400-1425.
- John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
- KOHLBERG, Elon & MERTENS, Jean-François, "undated".
"On the strategic stability of equilibria,"
CORE Discussion Papers RP
716, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
- 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.
- Oliveros, Santiago, 2013. "Abstention, ideology and information acquisition," Journal of Economic Theory, Elsevier, vol. 148(3), pages 871-902.
- Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
When requesting a correction, please mention this item's handle: RePEc:mod:recent:100. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.