I've just read the best paper I've seen in months! It presents a model which plausibly explains why "the nouveau rich flaunt their wealth, but the old rich scorn such gauche displays. Moderate quality goods are advertized heavily, while high quality goods rely on their reputation. Minor officials prove their status with petty displays of authority, while the truly powerful show their strength through gestures of magnanimity. The middle class are bastions of mainstream culture, while priviledged youth are drawn to countercultural lifestyles. People of average education show off the studied regularity of their script, but the well-educated often scribble illegibly. Mediocre students answer a teacher's easy question, but the best students are embarrassed to prove their knowledge of trivial points. Acquaintances show their good intentions by politely ignoring ones flaws, while close friends show intimacy by teasingly highlighting them. People of moderate ability seek formal credentials to impress employers and society, but the talented often downplay their credentials even if they have bothered to obtain them. A person of average reputation defensively refutes accusations against his character, while a highly-respected person finds it demeaning to dignify accusations with a response."
That paper is:
Too Cool For School? A Theory of Counter-Signaling
By Nick Feltovich, Rick Harbaugh, and Ted To
In sender--receiver games high--quality types can distinguish themselves from low--quality types by sending a costly signal. Allowing for additional, noisy information on sender types can radically alter sender behavior in such games. We examine equilibria where medium types separate themselves from low types by signaling, but high types then differentiate themselves from medium types by not signaling, or countersignaling. High types not only save the cost of signaling by relying on the additional information to stochastically separate them from low types, but in doing so they separate themselves from the signaling medium types. Hence they may countersignal even when signaling is a productive activity. To evaluate this theory we report on a two-- cell experiment in which the unique Nash equilibrium of one cell involves countersignaling by high types. Experimental results confirm that subjects can learn to countersignal.
The paper does a great job explaining the model and giving example applications. The experiments are a good idea, though poorly executed.
Robin Hanson
hanson@econ.berkeley.edu http://hanson.berkeley.edu/ RWJF Health Policy Scholar FAX: 510-643-8614 140 Warren Hall, UC Berkeley, CA 94720-7360 510-643-1884