Too Cool for School? Signalling and Countersignalling

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.