Pecuniary Emulation and Invidious Distinction: Signaling Under Behavioral Diversity

22 Pages Posted: 30 Oct 2023

See all articles by Junichiro Ishida

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

We introduce behavioral diversity to an otherwise standard signaling model, in which a fraction of agents choose their signaling actions according to an exogenous distribution. These behavioral agents provide opportunities for strategic low-type agents to successfully emulate higher types in equilibrium, which in turn reduces the cost for strategic high-type agents to separate from lower types. Behavioral diversity thus improves the equilibrium payoffs to all types of strategic agents. The model also exhibits a convergence property which is intuitively more appealing than the least-cost separating equilibrium of the standard setting.

Keywords: least-cost separating equilibrium, insensitivity to prior, behavioral diversity, equilibrium emulation

Suggested Citation

Ishida, Junichiro and Suen, Wing, Pecuniary Emulation and Invidious Distinction: Signaling Under Behavioral Diversity. Available at SSRN: https://ssrn.com/abstract=4617756 or http://dx.doi.org/10.2139/ssrn.4617756

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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