Signaling Under Double-Crossing Preferences the Case of Discrete Types

49 Pages Posted: 28 Aug 2023

See all articles by Chia‐Hui Chen

Chia‐Hui Chen

Kyoto University - Institute of Economic Research

Junichiro Ishida

Osaka University - Institute of Social and Economic Research

Wing Suen

The University of Hong Kong - University of Hong Kong

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Abstract

The class of double-crossing preferences, where signaling is cheaper for higher types than for lower types at low signaling levels and the opposite is true at high signaling levels, underlines the phenomenon of countersignaling, with intermediate types choosing higher actions than higher and lower types. We provide an algorithm to systematically construct an equilibrium and thus establish equilibrium existence for this general class of preferences with an arbitrary discrete-type distribution. Our analysis sheds light on the connection between discrete-type and continuous-type models and clarifies robust predictions of signaling under double-crossing preferences.

Keywords: countersignaling, weak pairwise-matching condition, minimum allocation, low types separate and high types pairwise-pool

Suggested Citation

Chen, Chia‐Hui and Ishida, Junichiro and Suen, Wing, Signaling Under Double-Crossing Preferences the Case of Discrete Types. Available at SSRN: https://ssrn.com/abstract=4554536 or http://dx.doi.org/10.2139/ssrn.4554536

Chia‐Hui Chen

Kyoto University - Institute of Economic Research ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto 606-8501
JAPAN

Junichiro Ishida (Contact Author)

Osaka University - Institute of Social and Economic Research ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Wing Suen

The University of Hong Kong - University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

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