Actions and signals

Abstract

For many signaling applications, the real-world scenario fails to match the model setup. Actions are often unobservable but combine with the sender's type to determine an observable signal. Introducing a theory of generalized signaling, we show the nature of equilibria can fundamentally differ from the canonical signaling model. In fact, we find both over- and under-investment arise in important signaling environments. Our model extends to multiple actions and signal jamming environments with incomplete sender information. We present results for equilibrium construction and show that uninformed sender behavior may be more efficient than a fully informed sender's.