Only Time Will Tell: Credible Dynamic Signaling

Publikation: Working paper › Forskning

Standard

Only Time Will Tell: Credible Dynamic Signaling. / Starkov, Egor.

2020.

Publikation: Working paper › Forskning

Harvard

Starkov, E 2020 'Only Time Will Tell: Credible Dynamic Signaling'. <https://ssrn.com/abstract=3668132>

APA

Starkov, E. (2020). Only Time Will Tell: Credible Dynamic Signaling. University of Copenhagen. Institute of Economics. Discussion Papers (Online) Nr. 20-05 https://ssrn.com/abstract=3668132

Vancouver

Starkov E. Only Time Will Tell: Credible Dynamic Signaling. 2020.

Author

Starkov, Egor. / Only Time Will Tell: Credible Dynamic Signaling. 2020. (University of Copenhagen. Institute of Economics. Discussion Papers (Online); Nr. 20-05).

Bibtex

@techreport{a70bd4972db64ee390e3eb09711f599b,
title = "Only Time Will Tell: Credible Dynamic Signaling",
abstract = "This paper explores a model of dynamic signaling without commitment. It is known that separating equilibria do not exist if the sender cannot commit to future costly actions, since no single action can have enough weight to be an effective signal. This paper, however, shows that informative and payoff-relevant signaling can occur even without commitment and without resorting to unreasonable off-path beliefs. Such signaling can only happen through attrition, when the weakest type mixes between revealing own type and pooling with the stronger types. The possibility of full information revelation in the limit hence depends crucially on the assumptions about the state space. We illustrate the results by exploring a model of dynamic price signaling and show that prices may be informative of product quality even if the seller cannot commit to future prices, with both high and low prices being able to signal high quality.",
keywords = "dynamic signaling, repeated signaling, reputation, attrition, dynamic signaling, repeated signaling, reputation, attrition, C73, D82, D83, L15",
author = "Egor Starkov",
year = "2020",
language = "English",
series = "University of Copenhagen. Institute of Economics. Discussion Papers (Online)",
number = "20-05",
type = "WorkingPaper",

}

RIS

TY - UNPB

T1 - Only Time Will Tell: Credible Dynamic Signaling

AU - Starkov, Egor

PY - 2020

Y1 - 2020

N2 - This paper explores a model of dynamic signaling without commitment. It is known that separating equilibria do not exist if the sender cannot commit to future costly actions, since no single action can have enough weight to be an effective signal. This paper, however, shows that informative and payoff-relevant signaling can occur even without commitment and without resorting to unreasonable off-path beliefs. Such signaling can only happen through attrition, when the weakest type mixes between revealing own type and pooling with the stronger types. The possibility of full information revelation in the limit hence depends crucially on the assumptions about the state space. We illustrate the results by exploring a model of dynamic price signaling and show that prices may be informative of product quality even if the seller cannot commit to future prices, with both high and low prices being able to signal high quality.

AB - This paper explores a model of dynamic signaling without commitment. It is known that separating equilibria do not exist if the sender cannot commit to future costly actions, since no single action can have enough weight to be an effective signal. This paper, however, shows that informative and payoff-relevant signaling can occur even without commitment and without resorting to unreasonable off-path beliefs. Such signaling can only happen through attrition, when the weakest type mixes between revealing own type and pooling with the stronger types. The possibility of full information revelation in the limit hence depends crucially on the assumptions about the state space. We illustrate the results by exploring a model of dynamic price signaling and show that prices may be informative of product quality even if the seller cannot commit to future prices, with both high and low prices being able to signal high quality.

KW - dynamic signaling

KW - repeated signaling

KW - reputation

KW - attrition

KW - dynamic signaling

KW - repeated signaling

KW - reputation

KW - attrition

KW - C73

KW - D82

KW - D83

KW - L15

M3 - Working paper

T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)

BT - Only Time Will Tell: Credible Dynamic Signaling

ER -

ID: 248295387