Signaling Game

Signaling Game

Introduction

In economics, the signaling game is referred to as a type of two players in which, one player posses incomplete information while the other player has complete information. The strategy set of the informed player, comprises of signals which are shaped by information. The set of strategies of uninformed player comprises of actions based on the signals of the informed player. Commonly, the strategic objective of a signaling game is to guess the hidden information of the opponent by observing their actions. the earliest work on the games of signaling was carried out by Spence in 1973, “Model of educational Signaling”. His work was followed by another researcher, Zahari, in 1977 on the Animal Modeling of Signaling. It was in 1980, when the scholars and researchers constructed a more official model, and recognized the specific conditions which allowed for the selection of exclusive equilibrium outcomes in foremost models.

Discussion

Example of Signaling Game

The examples of signaling game are spread all around us. We go an office of a doctor or watch a commercial of Omega Watch being modeled by Daniel Craig, the signaling game is very much present in these examples.

Visit to Doctor

In the signaling game, one opponent is called a signal sender (S) and one is called signal receiver (.R). The signals are of great importance and provide useful information. The signals sent by the sender are indirect and the interpretation of them is required by receiver. Sometimes these signals can be manipulative and results the receiver to assume something which is not actually a reality. As in our example, a picture of diploma on the wall of doctor' office may let us assume the qualification of the doctor. This on the contrary, provides little information about the quality of the doctor as mere date of graduation and name ...