The Signalling Value of Simplicity

Roman Dolecek, Antoine Dubus, Nicolas Sahuguet and Patrick Waelbroeck

No 19821, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Complex signals are often misunderstood by their receivers, leading to failures of information transmission in signaling games. In this study, we introduce novel methods to systematically assess the complexity of a wide range of signals, using the concepts of theoretical and analogical complexity. Theoretical complexity measures the amount of information a signal contains when compressed, while analogical complexity captures its social relevance. To illustrate our approach, we analyze data from the sale of license plates in Switzerland, where specific numbers serve as indicators of social status. By evaluating both the theoretical and analogical complexity of all license plates, we show that plates with simpler designs tend to sell for higher prices. Our findings suggest that simplicity is a key factor of a signal’s perceived value, offering broader implications for signaling theory and decision-making in contexts involving complex reasoning.

Keywords: Complexity; Signaling; Conspicuous consumption (search for similar items in EconPapers)
JEL-codes: D12 Z13 (search for similar items in EconPapers)
Date: 2025-01
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