Only Time Will Tell: Credible Dynamic Signaling

Egor Starkov

No 20-05, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper explores a model of dynamic signaling without commitment. It is known that separating equilibria do not exist if the sender cannot commit to future costly actions, since no single action can have enough weight to be an effective signal. This paper, however, shows that informative and payoff-relevant signaling can occur even without commitment and without resorting to unreasonable off-path beliefs. Such signaling can only happen through attrition, when the weakest type mixes between revealing own type and pooling with the stronger types. The possibility of full information revelation in the limit hence depends crucially on the assumptions about the state space. We illustrate the results by exploring a model of dynamic price signaling and show that prices may be informative of product quality even if the seller cannot commit to future prices, with both high and low prices being able to signal high quality.

Keywords: dynamic signaling; repeated signaling; reputation; attrition (search for similar items in EconPapers)
JEL-codes: C73 D82 D83 L15 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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Related works:
Journal Article: Only time will tell: Credible dynamic signaling (2023)
Working Paper: Only Time Will Tell: Credible Dynamic Signaling (2022)
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