Selling signals

Zhuoran Lu

Journal of Economic Theory, 2025, vol. 224, issue C

Abstract: This paper studies a signaling model in which a strategic player can manipulate the cost of signaling. A seller chooses a price scheme for a good, and a buyer with a hidden type chooses how much to purchase as a signal to receivers. When receivers observe the price scheme, the seller charges monopoly prices, and the buyer purchases less than the first best. In contrast, when receivers do not observe the price scheme, the demand for signals is more elastic. In equilibrium, the seller charges lower prices, and the buyer purchases more than when receivers observe the price scheme; the highest types purchase more than the first best. The model suggests that price transparency benefits the seller but harms the buyer. The model can be applied to schools choosing tuition, retailers selling luxury goods and media companies selling advertisements.

Keywords: Signaling; Screening; Signal jamming; Price transparency (search for similar items in EconPapers)
JEL-codes: D82 H21 L12 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053125000122
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:224:y:2025:i:c:s0022053125000122

DOI: 10.1016/j.jet.2025.105966

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().