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Signaling in deterministic and stochastic settings

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  • Jeitschko, Thomas D.
  • Normann, Hans-Theo

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

  • Jeitschko, Thomas D. & Normann, Hans-Theo, 2011. "Signaling in deterministic and stochastic settings," DICE Discussion Papers 35, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  • Handle: RePEc:zbw:dicedp:35
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    References listed on IDEAS

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    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. Krautheim, Sebastian & Verdier, Thierry, 2016. "Offshoring with endogenous NGO activism," Journal of International Economics, Elsevier, vol. 101(C), pages 22-41.
    3. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, vol. 115(1), pages 7-10.
    4. 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.
    5. TRUYTS, Tom, 2012. "Stochastic signaling: information substitutes and complements," CORE Discussion Papers 2012022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Olivier Bos & Francisco Gomez-Martinez & Sander Onderstal & Tom Truyts, 2017. "Signaling in auctions: experimental evidence," Working Papers Department of Economics 585499, KU Leuven, Faculty of Economics and Business, Department of Economics.
    7. Clémence Christin, 2013. "Entry Deterrence Through Cooperative R&D Over-Investment," Recherches économiques de Louvain, De Boeck Université, vol. 79(2), pages 5-26.
    8. repec:eee:jhecon:v:55:y:2017:i:c:p:1-13 is not listed on IDEAS
    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. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. 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".

    More about this item

    Keywords

    experiments; learning; noise; signaling; stochastic environments;

    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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