Too Cool for School?

Signaling and Countersignaling

H. Richmond Harbaugh, Nick Feltovich and Ted To

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.

JEL Classifications: C72, D82, D83

A PDF version of the paper is downloadable. Some of the mathematical proofs and the experiment instructions and data are also available.