Too Cool for School? Signalling and Countersignalling

Posted: 23 Oct 2002  

Nick Feltovich

University of Houston - Department of Economics

Rick Harbaugh

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Indiana University - Department of Economics

Ted To

Bureau of Labor Statistics

Abstract

In signalling 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 countersignalling itself is a signal of confidence that separates high types from medium types. Experimental results confirm that subjects can learn to countersignal.

Suggested Citation

Feltovich, Nick and Harbaugh, Rick and To, Ted, Too Cool for School? Signalling and Countersignalling. RAND Journal of Economics, Vol. 33, No. 4, Winter 2002. Available at SSRN: https://ssrn.com/abstract=338223

Nicholas J. Feltovich

University of Houston - Department of Economics ( email )

Houston, TX 77204-5882
United States

Rick Harbaugh (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-2777 (Phone)
812-855-3354 (Fax)

HOME PAGE: http://www.bus.indiana.edu/riharbau/

Indiana University - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

Ted To

Bureau of Labor Statistics ( email )

2 Massachusetts Avenue, NE
Room 4130
Washington, DC 20212
United States
202-691-6590 (Phone)
202-691-6583 (Fax)

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