Research & Publications

Journal Articles

Too Cool for School? Signaling and Countersignaling

2002, Rand (Bell) Journal of Economics

Nick Feltovich, Rick Harbaugh, Ted To

Abstract

In signaling environments ranging from consumption to education, high quality senders often shun the standard signals that should separate them from lower quality senders. We find that allowing for additional, noisy information on sender quality permits equilibria where medium types signal to separate themselves from low types, but high types then choose to not signal or "countersignal". High types not only save costs by relying on the additional information to stochastically separate them from low types, but countersignaling itself is a signal of confidence which separates high types from medium types. Experimental results confirm that subjects can learn to countersignal.

Citation

Feltovich, Nick, Richmond Harbaugh, and Ted To (2002), "Too Cool for School? Signalling and Countersignalling," RAND Journal of Economics, Vol. 33, pp. 630-649.