Costly signaling and generous behavior
Mohr, Sascha Janina
This thesis explores the use of generous behaviour as a costly signal to convey information about an unobservable social characteristic to other individuals in one's social environment. Building on recent contributions in this spirit, I develop a theoretical framework that contrasts signaling activities without social benefits with activities that benefit the observers in situations in which individuals compete for access to a scarce social good. The objective of the first part of the thesis is to characterize the possible separating equilibria in each case. While one obtains a multiplicity of equilibria when the agents employ neutral signals to convey information, one can make a unique prediction with respect to the individuals' equilibrium behaviour if they use beneficial signaling activities, the agents are of two discrete types, behave symmetrically within their respective types, and the observers of the signals adopt non-decreasing beliefs vis-à-vis the signalers' relative quality. In view of their sharp divergence, the second part of the thesis investigates experimentally the precision of these predictions. The results provide support for many elements of the theory. Among others, the behaviour of individuals in the treatments with beneficent signals is much more closely in line with the theoretical predictions than expected given the complexity of their behavioural implications, especially when it comes to the similarity of the participants' behaviour within them. Behaviour in the treatment with neutral signals, in turn, is consistent with multiple equilibria. The final part of the thesis explores what kind of signaling activity individuals trying to communicate their intentions to potential interaction partners will use in various social settings if given a choice. To this end, the framework developed in the first part is extended to allow the signalers to choose endogenously a signal from a “menu” of signaling activities rather than exogenously prescribing a messaging tool. Besides revealing that the uniqueness result of the framework without choice no longer obtains, the results indicate that the players may, under some conditions, opt for inefficient signals.