The Complex Structure of Signals and the Recursive Nature of their Interpretation

Abstract

Signals are more complex than current research suggests. I identify two aspects of signals: the technical aspect relays direct information about the sender; the institutional aspect conveys legitimacy through third-party status. Additionally, I propose signals are multilayered and that their interpretation is recursive in nature. I show how the interaction between the sender’s ability to generate signals and the receiver’s ability to interpret signals determines which aspect of the signal will be prominent, and, that the distance between the sender and receiver determines the depth of recursion. As a result, independent of the sender’s underlying quality, the receiver’s capabilities to discern this quality determines the signal’s influence on the receiver’s decision. Hence, signals’ effectiveness is target specific