Persuasion and learning by countersignaling

• Published in: Economics letters 2013-12, Vol.121 (3), p.487-491
• Main Authors: Chung, Kim-Sau, Eső, Péter
• Format: Article
• Language: English
• Subjects: Countersignaling; Equilibrium; Game theory; Learning; Persuasion; Productivity; Signaling; Studies; Tradeoff analysis
• ISSN: 0165-1765; 1873-7374
• DOI: 10.1016/j.econlet.2013.10.002

We model countersignaling (i.e., very high types refraining from signaling) arising from the tradeoff between persuasion and learning in a signaling game. We assume that the agent has imperfect private information regarding his/her productivity, which the signaling action provides additional verifiable information about. A higher-type agent benefits more from providing such objective, albeit imprecise, “proof” for the market, but may also gain less from learning about his/her productivity. When the latter effect dominates the former for the very high types, the equilibrium exhibits countersignaling: very high and low types pool on refraining from signaling, and only the medium types signal. Under certain conditions, the countersignaling equilibrium is the unique pure-strategy perfect sequential equilibrium. •We provide a new model of countersignaling (very high types not bothering to signal).•Countersignaling arises from the interaction between persuasion and learning.•We characterize all potential equilibria of the game.•We characterize when a countersignaling equilibrium exists.•We characterize when a countersignaling equilibrium is uniquely robust.