Signaling Game Research Articles

Hiring and firing – a signaling game

Abstract We study a signaling game between an employer and a potential employee, where the employee has private information regarding their production capacity. At the initial stage, the employee communicates a salary claim, after which the true production capacity is gradually revealed to the employer as the unknown drift of a Brownian motion representing the revenues generated by the employee. Subsequently, the employer has the possibility to choose a time to fire the employee in case the estimated production capacity falls short of the salary. In this setup, we use filtering and optimal stopping theory to derive an equilibrium in which the employee provides a randomized salary claim and the employer uses a threshold strategy in terms of the conditional probability for the high production capacity. The analysis is robust in the sense that various extensions of the basic model can be solved using the same methodology, including cases with positive firing costs, incomplete information about an individual’s own type, as well as an additional interview phase.

Exploring the importance of stochasticity to Hybrid Equilibria in a Discrete Signaling Game.

Communication via evolved signals is ubiquitous (both within and between species) in the natural world. However, how honest we should expect signals to be remains an open question. Hybrid equilibria are a form of equilibria predicted by discrete signaling games in which signalers are sometimes dishonest and signals do not completely reliably convey information on signaler quality. While these equilibria have been theoretically demonstrated in several signaling games, their dynamics in a stochastic simulation of evolutionary trajectories (that include representation of the inherent noise expected in evolution in the natural world) have not previously been studied. In this paper, we present an agent-based simulation of a discrete signaling game which exhibits hybrid equilibria. We find that while hybrid equilibria are evolutionarily attractive where they exist, populations exhibit variable and often drastic oscillating behavior around the predicted equilibrium values. We discuss how these dynamics might offer valuable opportunity for detecting hybrid equilibria in natural populations.

Signal Game and Compact Particle Swarm Optimization Based on Pareto Distribution for Attack–Defense Eavesdropping Confrontation Analysis in Internet of Things

Signal Game and Compact Particle Swarm Optimization Based on Pareto Distribution for Attack–Defense Eavesdropping Confrontation Analysis in Internet of Things

Signaling or not? The pricing strategy under fairness concerns and cost information asymmetry

Supply chain fairness issues have become crucial and prevalent recently, whereas the operational decisions in the fair chain are more and more challenging when involving information asymmetry. Considering the fact that the upstream supplier of a chain generally has private production cost information, this paper investigates how the supplier strategically makes pricing decisions under the own private information and the downstream fairness concerns. Based on inequity aversion theory, we set up a signaling game between the supplier and the retailer with two kinds of inequity aversion, disadvantageous inequity aversion and advantageous inequity aversion, respectively. Compared with the scenario of symmetric information, under asymmetric information, we find that: the high-cost supplier distorts the wholesale price upward to avoid the low-cost supplier's price mimicry when the retailer has disadvantageous inequity aversion and the cost difference between the two types of suppliers is small; the supply chain's expected profit and expected utility may increase due to the reason that the low-cost supplier distorts his wholesale price downward when the retailer has advantageous inequity aversion, which mitigates the double marginalization. Moreover, we extend the base model to the scenario of endogenous prior probability on supplier cost type and we show that when the retailer has disadvantageous inequity aversion, cost information asymmetry may improve the willingness of the high-cost supplier to become the low-cost supplier. Our results can provide some practical insights on managing cost information asymmetry from the perspectives of the supply chain and the industry.

Store brand entry with asymmetric cost information

This study conducts a research on the dominated-retailer’s establishment strategy of a store brand in a supply chain, in which the retailer possesses private knowledge of the store brand’s product cost, while the manufacturer is only informed about the distribution of this cost information. The store brand entry with asymmetric information initiates a signaling game between the chain members. Through comparing equilibrium outcomes, we find that the pooling equilibrium consistently prevails as the dominant equilibrium, suggesting that the informed retailer is reluctant to reveal the cost information to her national brand cooperative manufacturer. We also explore the influence of a retailer’s store brand entry on the national-brand manufacturer’s performance. The findings reveal that, with asymmetric cost information, mutually beneficial outcomes for all parties involved can be achieved by the establishment of a store brand. Furthermore, we delve into how the asymmetric cost information affects the performance of the chain members. Surprisingly, our findings demonstrate that asymmetric cost information may be desirable not only for retailer, but also for the less informed manufacturer under specific circumstances. This suggests the possibility of supply chain members reaching a mutual agreement on the structure of asymmetric cost information.

Does vote buying undermine confidence in ballot secrecy? Theory and experimental evidence

Abstract Why does vote buying persist under the secret ballot? We argue initiating vote-buying transactions allows politicians to undermine voter confidence in the secret ballot, and thus to induce voter compliance. Our analysis consists of three parts. First, we present evidence from a survey experiment in Mexico that shows receiving material goods from a candidate diminishes voter confidence in ballot integrity. Next, we introduce an informational theory of vote buying that explains this phenomenon. Specifically, we develop a model of vote buying as a signaling game, in which a voter who is ex ante uncertain about a politician's capacity to monitor voter behavior learns new information from the politician's actions. Finally, we test the key insights from the model in a lab experiment. Our results suggest that, under certain conditions, offering material goods to voters is sufficient to erode their confidence in ballot secrecy, making vote buying effective.

Decreased inter-hemispheric connectivity predicts a coherent retrieval of auditory symbolic material

Investigating the transmission of information between individuals is essential to better understand how humans communicate. Coherent information transmission (i.e., transmission without significant modifications or loss of fidelity) helps preserving cultural traits and traditions over time, while innovation may lead to new cultural variants. Although much research has focused on the cognitive mechanisms underlying cultural transmission, little is known on the brain features which correlates with coherent transmission of information. To address this gap, we combined structural (from high-resolution diffusion imaging) and functional connectivity (from resting-state functional magnetic resonance imaging [fMRI]) with a laboratory model of cultural transmission, the signalling games, implemented outside the MRI scanner. We found that individuals who exhibited more coherence in the transmission of auditory symbolic information were characterized by lower levels of both structural and functional inter-hemispheric connectivity. Specifically, higher coherence negatively correlated with the strength of bilateral structural connections between frontal and subcortical, insular and temporal brain regions. Similarly, we observed increased inter-hemispheric functional connectivity between inferior frontal brain regions derived from structural connectivity analysis in individuals who exhibited lower transmission coherence. Our results suggest that lateralization of cognitive processes involved in semantic mappings in the brain may be related to the stability over time of auditory symbolic systems.

The epistemic spirit of divinity

We study strategic reasoning in a signaling game where players initially have common belief in an outcome distribution and in the event that the sender's beliefs are independent of her type. We characterize the behavioral implications of these epistemic hypotheses by means of a rationalizability procedure with belief restrictions. Our solution concept is related to, but weaker than Divine Equilibrium (Banks and Sobel, 1987). First, we do not obtain a sequential equilibrium, but just a perfect Bayesian equilibrium with heterogeneous off-path beliefs (Fudenberg and He, 2018). Second, when we model how the receiver may rationalize a particular deviation, we take into account that some types could have preferred a different deviation, and we show this is natural and relevant via an economic example.

Manufacturer Encroachment on a Sustainable Supply Chain under Asymmetric Green Information

This paper investigates manufacturer encroachment on a sustainable supply chain, where the manufacturer holds exclusive information on product greenness and is responsible for both corporate social responsibility (CSR) and greening. The manufacturer and the retailer play a signaling game whereby CSR effort and wholesale price serve as joint green signals. Findings reveal that, firstly, encroachment induces higher CSR efforts from manufacturers. When customers exhibit a strong CSR preference, the resulting CSR increment leads to increased offline demand and drives up both wholesale and retail prices in a mutually beneficial manner. This phenomenon is referred to as the CSR effect, yielding a win-win encroachment. Secondly, when signaling product greenness to highly CSR-sensitive customers, the high-greenness manufacturer principally distorts her CSR effort downward to an extent unprofitable for the low-greenness manufacturer to mimic and subordinately distorts the wholesale price downward to counter CSR-induced demand decrement and mitigate CSR cost pass-through downstream. Finally, the win-win encroachment pattern is characterized by encroachment profit and signal expense sharing, with encroachment strengthening downward-distorted signaling while signaling weakens the CSR effect. These insights contribute valuable guidance for green manufacturers in CSR decision-making, which functions as a component of green signaling and facilitates transitioning to dual-channel sustainable supply chains.

Beliefs, strategic interaction, and Hong Kong’s anti-extradition law movement: A game-theoretic analysis

Given the information and beliefs about the possibility of repression, when will the civil society organize protests against the government? Under what conditions will the government repress popular protests? In this paper, I employ a novel signaling game to model the strategic interaction between the regime and civil society during the 2019 Anti-Extradition Law Movement in Hong Kong. I illustrate how information and beliefs influence whether the civil society mobilizes mass protests. Specifically, I examine how government actions shape the civil society’s beliefs about the government type, which in turn determine the protest turnouts and the government’s decision to repress.

Adjusting Mood in Mandarin Chinese: A Game Theory Approach to Double and Redundant Negation with Entropy

Abstract This study investigates how Mandarin Chinese speakers use double and redundant negations to adjust information entropy and convey the speaker’s mood. Integrating Gricean implicature, signaling game theory, and information entropy, we quantified uncertainty in negation sentences by calculating self-information of negation markers and overall entropy for negations versus affirmatives. Analyzing sentences from the BCC Corpus of Mandarin Chinese newspapers, we extracted double and redundant negation patterns, calculated their frequencies, and compared entropy values in payoff matrices against affirmatives. Contextual analysis of surrounding discourse interpreted pragmatic functions. Our findings reveal that universal double negations reduce sentence entropy, intensifying assertiveness. Modal forms further decrease entropy, amplifying necessity, while conditional patterns strengthen the asserted conditions. Euphemistic double negations increase entropy, weaken assertiveness, and align with Levinson’s Manner Principle. This increase in entropy quantifies pragmatic markedness, allowing tentative critiques. Redundant negations significantly reduce entropy, strengthening negative attitudes. We elucidate how interlocutors navigate cooperative discourse by quantifying uncertainty via entropy measures, making contextually-optimal linguistic choices like assertion, indirectness, and emphasis. These findings impact signaling game theory and pragmatic markedness, with applications in natural language processing, cross-cultural communication, and computational models. Future research could explore other languages and cognitive and social factors in negation use.

Impacts of supply chain leadership on dynamic pricing under consumer patience information asymmetry

AbstractAs the online market rapidly develops, firms will face strategic consumers who differ in buying times. Given that the leadership structure in supply chains affects the chain members' decision‐making and performance, we study this impact in a two‐period dynamic pricing setting with an upstream manufacturer and a downstream retailer, where the patience degree of consumers is the retailer's private information. We examine two leadership scenarios: retailer dominance and manufacturer dominance. The two members play a signaling game under retailer dominance, whereas the manufacturer can only set its wholesale price based on its prior belief under manufacturer dominance. Our analysis indicates that when consumers are more patient, the retailer tends to share its private information with the manufacturer under retailer dominance to avoid the reduction of its retail margin and enhance its profitability. However, the retailer may keep the consumers' patience information private when the manufacturer dominates the supply chain because the manufacturer will set a compromised wholesale price and passively cede profits to the retailer. Finally, we examine consumer surplus and social welfare. We demonstrate that retailer dominance is the Pareto optimal strategy.

Information transmit strategy of e-commerce platform with financially constrained supplier

A signaling game model is constructed in the framework of a supply chain system consisting of a financially constrained supplier and an e-commerce platform acting as marketplace and a creditor simultaneously. The primary concern of this work is to investigate how the e-commerce platform, which has superior information about market demand, indirectly communicates this information to the financially constrained supplier through its marketing efforts. Under both separating and pooling equilibria, the decisions and profits of each member of the supply chain are firstly considered. Furthermore, using an “intuitive criterion”, the e-commerce platform’s dominant strategy and its influencing factors are analyzed. The results show that when there is a significant difference in the marginal marketing costs, the platform tends to choose the separating equilibrium. When the difference in marginal marketing costs is relatively slight, the e-commerce platform’s dominant strategy depends on the capital of the supplier and the level of market demand fluctuations. Specifically, the e-commerce platform will select the pooling equilibrium when market demand fluctuations are minimal, but the platform will select the separating equilibrium when market demand fluctuations are substantially large. If the supplier’s capital is increased within a certain range, the e-commerce platform is more motivated to select the pooling equilibrium. In addition, the platform usage fee ratio, the platform loan interest rate and the supplier’s prior beliefs are important factors influencing the platform’s decision.

The informational impact of prudential regulations

Banks take costly actions (such as capitalization, liquidity holding, and advanced risk management) to avoid financial distress and creditor runs. While directly affecting a bank’s risks, such actions can also signal the bank’s fundamentals. We show that prudential regulations have an informational impact: sufficiently tight regulations can eliminate inefficient separating equilibria in banks’ signaling game, thereby changing the information available to creditors and their incentives to run. When accounting for this informational impact, tightening regulations can improve banks’ payoffs and be considered bank incentive-compatible. We support this novel, information-based rationale for regulations with evidence from the US liquidity requirement.

Counterfeit Competition With Strategic Consumers

This article investigates competition between a branded firm selling a durable good over two periods and a deceptive counterfeiter entering the market in the second period. The two firms engage in a price signaling game in which the branded firm designs its price strategy over two periods, and strategic consumers decide whether to buy the authentic product upfront or wait until the second period. We find that the branded firm may benefit from the counterfeit competition if the quality gap between the two products is sufficiently large. The intuition is that the branded firm would charge a high second-period price to signal its authenticity, inducing more consumers to buy the genuine product upfront. This strategy allows the branded firm to increase its first-period price and demand simultaneously, thus effectively mitigating the time-inconsistency problem. Otherwise, when the quality gap is small, counterfeit competition leads to reduced profits for the authentic product. These results remain robust throughout several extensions of the base model, including partially informed or naive consumers, asymmetric retail channels, post-purchase regret, and endogenized counterfeit.

Game-theoretic analytics for privacy preservation in Internet of Things networks: A survey

Privacy preservation of the big data generated, deposited, and communicated by smart IoT (Internet of Things) nodes is the major challenge in IoT networks. Anonymization, encryption, and routing protocol constitute the existing prevalent privacy-preserving approaches, most of which have successfully implemented the privacy preservation of data query, data mining and data aggregation. Nevertheless, there has been a gradual switch in the selection of privacy-preserving technology. Predictive game-theoretic analytics for privacy preservation in IoT networks has received significant attention since it can effectively settle the conflicts between attackers and defenders. In this survey, we explain the basics of various games mainly applied for IoT privacy preservation, such as simultaneous game, stochastic game, bargain game, differential game, mean field game, aggregation game, Stackelberg game, signaling game, repeated game, evolutionary game, and cooperative game. We then explore different applications for game theory-based privacy preservation in IoT networks, followed by discussing the differences among the existing solution of privacy-preserving issues using different games under specific IoT scenarios. Moreover, we consider the challenges and outline future research directions. In conclusion, this survey not only presents existing work on applying game theory to preserve privacy in current IoT networks including smart grids, intelligent transportation systems, crowdsensing, edge-based IoT, integrated energy systems, blockchain IoT, Social IoT and Industrial IoT, but it also encourages researches to further dig deeper into rare areas.

Neuro-Symbolic Causal Reasoning Meets Signaling Game for Emergent Semantic Communications

Neuro-Symbolic Causal Reasoning Meets Signaling Game for Emergent Semantic Communications

Dynamics of Signaling Games

Dynamics of Signaling Games

A Study of Customer Preference Transmission for New Energy Vehicles Based on a Signaling Game and Separating Equilibrium

Although there are many methods that can be used to obtain customer preferences for new energy vehicles, most studies generally overlook the fact that customer preferences are private information. The purpose of this study is to investigate the transmission mechanism of customer preferences by taking into account situations in which customers lie. Through a signaling game model, this study analyzed the transmission mechanism of customer preference information for the center control touch screen of new energy vehicles based on separation equilibrium. The results show that when inequality (1) remains, such an equilibrium forms: the customers send the real preference signal, the manufacturer then adopts a new sample consistent with the received signal and prices the product accordingly, and, finally, the customers pay for the new NEV. When inequality (2) remains, the following equilibrium forms: customers signal the opposite of their private preference, the manufacturer then adopts a new sample opposite to the received signal, and, finally, customers pay for the new NEV.

Who's the deceiver? Identifying deceptive intentions in communication

Recognizing people's deceptive intentions when communicating is crucial to detect statements that may drive us to unintended harmful decisions. This paper studies individuals' intentions in games where players can tell the truth with deceiving purposes. In a preregistered experiment, we combine a sender-receiver game with possible strategic considerations and the associated belief elicitation questionnaire, with a sender-receiver game with no room for strategic considerations. We propose a new method that improves the identification of senders' intentions to deceive. Our findings reveal that relying solely on the strategic sender-receiver game and the elicited beliefs, as previously proposed in the literature, can lead to misinterpreting the actual intentions of a substantial proportion of senders. In particular, our new method helps discern actual deceivers from pessimistic truth-tellers and identifies senders who try to excuse their previous deceiving message. All in all, our method identifies more senders with deceptive intentions compared to previous methods.