Showing Off or Laying Low? The Economics of Psych-outst: The Economics of Psych-outs

Philipp Denter*, John Morgan, Dana Sisak

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Scopus)

Abstract

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. (JEL D82, D83, D91, Z13)

Original languageEnglish
Pages (from-to)529-580
Number of pages52
JournalAmerican Economic Journal. Microeconomics
Volume14
Issue number1
DOIs
Publication statusPublished - Feb 2022

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