TY - JOUR
T1 - Showing Off or Laying Low? The Economics of Psych-outs
T2 - The Economics of Psych-outs
AU - Denter, Philipp
AU - Morgan, John
AU - Sisak, Dana
N1 - Publisher Copyright:
© 2022
PY - 2022/2
Y1 - 2022/2
N2 - We analyze the incentives for showing off, which we model as a costly signaling game, and study the consequences of norms against such behavior. Prior to competing in a contest, a newcomer can signal his talent to an incumbent. In equilibrium, costly signaling of ability occurs only when the newcomer is exceptionally talented. In such situations signaling benefits both contestants: the newcomer for obvious reasons; the incumbent by economizing on wasted effort in the contest. Our results rationalize the emergence of norms against showing off in settings where total effort is important. When selection efficiency matters, such norms decrease welfare.
AB - We analyze the incentives for showing off, which we model as a costly signaling game, and study the consequences of norms against such behavior. Prior to competing in a contest, a newcomer can signal his talent to an incumbent. In equilibrium, costly signaling of ability occurs only when the newcomer is exceptionally talented. In such situations signaling benefits both contestants: the newcomer for obvious reasons; the incumbent by economizing on wasted effort in the contest. Our results rationalize the emergence of norms against showing off in settings where total effort is important. When selection efficiency matters, such norms decrease welfare.
UR - http://www.scopus.com/inward/record.url?scp=85126802897&partnerID=8YFLogxK
U2 - 10.1257/mic.20190234
DO - 10.1257/mic.20190234
M3 - Article
SN - 1945-7669
VL - 14
SP - 529
EP - 580
JO - American Economic Journal. Microeconomics
JF - American Economic Journal. Microeconomics
IS - 1
ER -