hero working papers

Signaling Covertly Acquired Information

Number: 658
Year: 2020
Author(s): Mehmet Ekmekci and Nenad Kos
We study the interplay between information acquisition and signaling. A sender decides whether to learn his type at a cost prior to taking a signaling action. A receiver responds after observing the signaling action. In the benchmark model where the sender's information acquisition decision is observed the sender does not acquire information and, therefore, does not signal. A rationale for signaling is provided by the model in which information acquisition is covert. There, in the unique equilibrium outcome surviving a form of never weak best response refinement the sender does acquire information and signals when the information is cheap.

Keywords: Signaling, information acquisition, refinements
JEL codes: D82, G34