Countersignaling

Last updated

Countersignaling or countersignalling is the behavior in which agents with the highest level of a given property invest less into proving it than individuals with a medium level of the same property. This concept is primarily useful for analyzing human behavior and thus relevant to signaling theory in economics, sociology and psychology.

Signals and signaling theory

Many of the things that people and animals want to know about each other, such as toughness, cooperativeness or fertility, are not directly observable. Instead, observable indicators of these unobservable properties must be used to communicate them to others. These are signals. Signaling theory deals with predicting the level of effort that individuals, the signalers, should invest to communicate their properties to other individuals, the receivers, and how these receivers interpret their signals.

Two conditions have to be fulfilled before signaling theory should be applied. First, there has to be informational asymmetry between the signaler and receiver (I know more about my own level of toughness than you do). Second, the potential for divergence or conflict of interest between the signaler and receiver. Without either of these two conditions, there is no need for signals as the problem is merely one of communication. Once these conditions are fulfilled, signals have to be used by individuals to prove to the other person their underlying hidden property.

Much research is concerned with understanding what signals signalers should send to convince a receiver that they have a certain property, and what signals a receiver should be convinced by. One way of doing this is by putting money on the table just to prove that you can; someone without the property would not be able to do the same. For example, in biology peacocks expend energy on elaborate plumage that increase their risk of dying. By doing this they demonstrate their genetic fitness, as genetically less fit males can only grow small plumage, while genetically better individuals can grow larger ones. (In biology, this is known as the handicap principle.)

Countersignaling, by contrast, is showing off by not showing off, or by playing humble. For instance, the new money are eager to flaunt their wealth, and often surround themselves with expensive luxury items. Those with old money are more understated, preferring not to waste money on what they deem frivolities. [1] [2]

There are a number of different models that deal with this behavior and explain how rational individuals – those interested only in maximising certain utility – would find countersignaling beneficial. One of these is by Feltovich, Harbaugh and To. [1] [3] They developed a formal model in which receivers of signals judge the senders of signals based not only on what can be inferred from the signal sent, but also on additional information, which is assumed to be helpful but not perfect. For example, senders might be of low, medium, or high quality, and the additional information might be adequate for distinguishing low from high but not necessarily from distinguishing medium from low or high. Under certain circumstances, medium-quality senders will have an incentive to signal (to ensure that they can be distinguished from low-quality ones), but high-quality senders may not—they are not likely to be mistaken for low-quality senders in any case, and signaling behavior may mark them as medium.

Related Research Articles

<span class="mw-page-title-main">Phenotype</span> Composite of the organisms observable characteristics or traits

In genetics, the phenotype is the set of observable characteristics or traits of an organism. The term covers the organism's morphology, its developmental processes, its biochemical and physiological properties, its behavior, and the products of behavior. An organism's phenotype results from two basic factors: the expression of an organism's genetic code and the influence of environmental factors. Both factors may interact, further affecting the phenotype. When two or more clearly different phenotypes exist in the same population of a species, the species is called polymorphic. A well-documented example of polymorphism is Labrador Retriever coloring; while the coat color depends on many genes, it is clearly seen in the environment as yellow, black, and brown. Richard Dawkins in 1978 and then again in his 1982 book The Extended Phenotype suggested that one can regard bird nests and other built structures such as caddisfly larva cases and beaver dams as "extended phenotypes".

In ethics and the social sciences, value theory involves various approaches that examine how, why, and to what degree humans value things and whether the object or subject of valuing is a person, idea, object, or anything else. Within philosophy, it is also known as ethics or axiology.

<span class="mw-page-title-main">Communication channel</span> Physical or logical connection used for transmission of information

A communication channel refers either to a physical transmission medium such as a wire, or to a logical connection over a multiplexed medium such as a radio channel in telecommunications and computer networking. A channel is used for information transfer of, for example, a digital bit stream, from one or several senders to one or several receivers. A channel has a certain capacity for transmitting information, often measured by its bandwidth in Hz or its data rate in bits per second.

Within the realm of communication studies, organizational communication is a field of study surrounding all areas of communication and information flow that contribute to the functioning of an organization. Organizational communication is constantly evolving and as a result, the scope of organizations included in this field of research have also shifted over time. Now both traditionally profitable companies, as well as NGO's and non-profit organizations, are points of interest for scholars focused on the field of organizational communication. Organizations are formed and sustained through continuous communication between members of the organization and both internal and external sub-groups who possess shared objectives for the organization. The flow of communication encompasses internal and external stakeholders and can be formal or informal.

<span class="mw-page-title-main">Behavioral ecology</span> Study of the evolutionary basis for animal behavior due to ecological pressures

Behavioral ecology, also spelled behavioural ecology, is the study of the evolutionary basis for animal behavior due to ecological pressures. Behavioral ecology emerged from ethology after Niko Tinbergen outlined four questions to address when studying animal behaviors: What are the proximate causes, ontogeny, survival value, and phylogeny of a behavior?

From a legal point of view, a contract is an institutional arrangement for the way in which resources flow, which defines the various relationships between the parties to a transaction or limits the rights and obligations of the parties.

<span class="mw-page-title-main">Information asymmetry</span> Concept in contract theory and economics

In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other.

<span class="mw-page-title-main">Handicap principle</span> Hypothesis in evolutionary biology

The handicap principle is a hypothesis proposed by the biologist Amotz Zahavi to explain how evolution may lead to "honest" or reliable signalling between animals which have an obvious motivation to bluff or deceive each other. It suggests that costly signals must be reliable signals, costing the signaller something that could not be afforded by an individual with less of a particular trait. For example, in sexual selection, the theory suggests that animals of greater biological fitness signal this status through handicapping behaviour, or morphology that effectively lowers this quality. The central idea is that sexually selected traits function like conspicuous consumption, signalling the ability to afford to squander a resource. Receivers then know that the signal indicates quality, because inferior-quality signallers are unable to produce such wastefully extravagant signals.

Network congestion in data networking and queueing theory is the reduced quality of service that occurs when a network node or link is carrying more data than it can handle. Typical effects include queueing delay, packet loss or the blocking of new connections. A consequence of congestion is that an incremental increase in offered load leads either only to a small increase or even a decrease in network throughput.

In moral philosophy, instrumental and intrinsic value are the distinction between what is a means to an end and what is as an end in itself. Things are deemed to have instrumental value if they help one achieve a particular end; intrinsic values, by contrast, are understood to be desirable in and of themselves. A tool or appliance, such as a hammer or washing machine, has instrumental value because it helps you pound in a nail or clean your clothes. Happiness and pleasure are typically considered to have intrinsic value insofar as asking why someone would want them makes little sense: they are desirable for their own sake irrespective of their possible instrumental value. The classic names instrumental and intrinsic were coined by sociologist Max Weber, who spent years studying good meanings people assigned to their actions and beliefs.

<span class="mw-page-title-main">Schreckstoff</span>

In 1938, the Austrian ethologist Karl von Frisch made his first report on the existence of the chemical alarm signal known as Schreckstoff in minnows. An alarm signal is a response produced by an individual, the "sender", reacting to a hazard that warns other animals, the receivers, of danger. This chemical alarm signal is released only when the sender incurs mechanical damage, such as when it has been caught by a predator, and is detected by the olfactory system. When this signal reaches the receivers, they perceive a greater predation risk and exhibit an antipredator response. Since populations of fish exhibiting this trait survive more successfully, the trait is maintained via natural selection. While the evolution of this signal was once a topic of great debate, recent evidence suggests schreckstoff evolved as a defense against environmental stressors such as pathogens, parasites, and UVB radiation and that it was later co-opted by predators and prey as a chemical signal.

<span class="mw-page-title-main">Signalling theory</span> Theory in evolutionary biology

Within evolutionary biology, signalling theory is a body of theoretical work examining communication between individuals, both within species and across species. The central question is when organisms with conflicting interests, such as in sexual selection, should be expected to provide honest signals rather than cheating. Mathematical models describe how signalling can contribute to an evolutionarily stable strategy.

<span class="mw-page-title-main">Signaling game</span> Game class in game theory

In game theory, a signaling game is a simple type of a dynamic Bayesian game.

Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions.

In contract theory, signalling is the idea that one party credibly conveys some information about itself to another party.

<span class="mw-page-title-main">Hydraulic telegraph</span> Semaphore systems using water-based mechanisms

A hydraulic telegraph refers to two different semaphore systems involving the use of water-based mechanisms as a telegraph. The earliest one was developed in 4th-century BC Greece, while the other was developed in 19th-century AD Britain. The Greek system was deployed in combination with semaphoric fires, while the latter British system was operated purely by hydraulic fluid pressure.

The intuitive criterion is a technique for equilibrium refinement in signaling games. It aims to reduce possible outcome scenarios by restricting the possible sender types to types who could obtain higher utility levels by deviating to off-the-equilibrium messages, and to types for which the off-the-equilibrium message is not equilibrium dominated.

Behavioral game theory seeks to examine how people's strategic decision-making behavior is shaped by social preferences, social utility and other psychological factors. Behavioral game theory analyzes interactive strategic decisions and behavior using the methods of game theory, experimental economics, and experimental psychology. Experiments include testing deviations from typical simplifications of economic theory such as the independence axiom and neglect of altruism, fairness, and framing effects. As a research program, the subject is a development of the last three decades.

Inclusive fitness in humans is the application of inclusive fitness theory to human social behaviour, relationships and cooperation.

Economic transparency refers to banks and other financial institutions that have made data available about their financial position and condition. However, the definition depends on the perspective of different research areas through which it is examined, mainly monetary economics, international finance, corporate finance, and others. The WTO defines economic transparency as a “degree to which trade policies and practices, and the process by which they are established, are open and predictable.”. United Nations Conference on Trade and Development relates to transparency as to “a state of affairs in which the participants in the investment process are able to obtain sufficient information from each other in order to make informed decisions and meet obligations and commitments”. According to the National Bureau of Economic Research (NBER) there are three main branches: transparency in economic policy, in the institutional structures surrounding the markets, and in the corporate sector.

References

  1. 1 2 Nick Feltovich, Rick Harbaugh and Ted To, "Too cool for school? Signalling and Countersignalling", RAND Journal of Economics, Vol. 33, Winter 2002, 630-649
  2. Conceptually.org, "What are signalling and countersignalling?", Date accessed: October 23, 2018
  3. "Signal failure? The economics of understatement". The Economist May 2003. Covering the same Feltlvich/Harbaugh/To paper.