Good signals gone bad: dynamic signalling with switching efforts

Sander Heinsalu

Papers from arXiv.org

Abstract: This paper examines signalling when the sender exerts effort and receives benefits over time. Receivers only observe a noisy public signal about the effort, which has no intrinsic value. The modelling of signalling in a dynamic context gives rise to novel equilibrium outcomes. In some equilibria, a sender with a higher cost of effort exerts strictly more effort than his low-cost counterpart. The low-cost type can compensate later for initial low effort, but this is not worthwhile for a high-cost type. The interpretation of a given signal switches endogenously over time, depending on which type the receivers expect to send it. JEL classification: D82, D83, C73. Keywords: Dynamic games, signalling , incomplete information

Date: 2017-07
New Economics Papers: this item is included in nep-mic and nep-reg
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Citations: View citations in EconPapers (3)

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