Journal of Political Economy Vol. 127 No. 4 2019
Muddled Information
Abstract
We study a model of signaling in which agents are heterogeneous on two dimensions. An agent’s natural action is the action taken in the absence of signaling concerns. Her gaming ability parameterizes the cost of increasing the action. Equilibrium behavior muddles information across dimensions. As incentives to take higher actions increase—due to higher stakes or more manipulable signaling technology—more information is revealed about gaming ability, and less about natural actions. We explore a new externality: showing agents’ actions to additional observers can worsen information for existing observers. Applications to credit scoring, school testing, and web searching are discussed.
- DOI
- 10.1086/701604
- Volume
- 127
- Issue
- 4
- Pages
- 1739-1776
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref