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Too Cool for School? A Theory of Counter signaling

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  • Feltovich, N.
  • Harbaugh, R.
  • To, T.

Abstract

In sender-receiver games high-quality types can distinguish themselves from low-quality types by sending a costly signal. Allowing for additional, noisy information on sender types can radically alter sender behavior in such games. We examine equilibria where medium types separate themselves from low types by signaling, but high types then differentiate themselves from medium types by not signaling or counter-signaling. High types not only save the cost of signaling by relying on the additional information to stochastically separate themselves from low types, but in doing so they separate themselves from the signaling medium types. Hence they may countersignal even when signaling is a productive activity. To evaluate this theory we report on a two-cell experiment in which the unique Nash-equilibrium of one cell involves counter signaling by high types. Experimental results confirm that subjects can learn to countersignal.

Suggested Citation

  • Feltovich, N. & Harbaugh, R. & To, T., 1998. "Too Cool for School? A Theory of Counter signaling," The Warwick Economics Research Paper Series (TWERPS) 518, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:518
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    References listed on IDEAS

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    1. Big Questions
      by Robin Hanson in Overcoming Bias on 2010-01-11 05:10:52

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    More about this item

    Keywords

    GAME THEORY ; INFORMATION ; LEARNING;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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