A little geeky but incredibly interesting.
How do high-types (that is, high in productivity, wealth, fecundity, or some other valued attribute) send signals to others to differentiate themselves from average based on status?
Average types, presumably less comfortable with their status, work hard to send the “right” signals. Since the average types signal to differentiate themselves from lower types, high types may choose not to signal, or “countersignal,” to differentiate themselves from medium types. Countersignalling is naturally interpreted as a sign of confidence. While signalling proves the sender is not a low type, it can also reveal the sender’s insecurity. Medium types have good reasons.
The nouveau riche ﬂaunt their wealth, but the old rich scorn such gauche displays. Minor ofﬁcials prove their status with petty displays of authority, while the truly powerful show their strength through gestures of magnanimity. People of average education show off the studied regularity of their script, but the well educated often scribble illegibly. Mediocre students answer a teacher’s easy questions, but the best students are embarrassed to prove their knowledge of trivial points. Acquaintances show their good intentions by politely ignoring one’s ﬂaws, while close friends show intimacy by teasingly highlighting them. People of moderate ability seek formal credentials to impress employers and society, but the talented often downplay their credentials even if they have bothered to obtain them. A person of average reputation defensively refutes accusations against his character, while a highly respected person ﬁnds it demeaning to dignify accusations with a response.
How can high types be so understated in their signals without diminishing their perceived quality? Most signalling models assume that the only information available on types is the signal, implying that high types will be confused with lower types if they do not signal. But in many cases other information is also available. For instance, wealth is inferred not just from conspicuous consumption, but also from information about occupation and family background. This extra information is likely to be noisy in that the sender cannot be sure what the receiver has learned, implying that medium-quality types may still feel compelled to signal to separate themselves from low types. But even noisy information will often be sufﬁcient to adequately separate high types from low types, leaving high types more concerned with separating themselves from medium types.
How does this translate into the real world?
A prospective employee who had good grades in high school is considering whether to mention her grades in a job interview. Because grading standards are weak, both medium- and high-productivity employees (Highs and Mediums) are known to have good grades, while only low-productivity employees (Lows) are known to have poor grades. Since lying about grades involves the chance of getting caught, the signal of mentioning good grades is costly to Lows but free to Mediums and Highs. In addition to this signal, the interviewer will receive from a former boss a recommendation regarding the prospective employee’s abilities. Lows expect to receive bad recommendations from their old boss and Highs expect to receive good recommendations, while Mediums receive good or bad recommendations with equal probability.
What should an interviewee do? Without the recommendation, Mediums and Highs should clearly mention their good grades, since it costs them nothing and since the grades differentiate them from Lows. With the addition of the extra information as embodied by the recommendation, the situation is less obvious. Consider if the interviewer believes that only Mediums mention their grades. Then if Mediums don’t mention their grades, they take the chance of either receiving a good recommendation and being thought of as a High or receiving a bad recommendation and being thought of as a Low. If Lows are sufﬁciently unproductive relative to Mediums and Highs, not mentioning grades is too risky. Highs face a different situation because they expect to receive a good recommendation. Since they need not worry about being perceived as a Low, they face a clear choice between being perceived as a Medium if they mention their grades and a High if they do not. Since receiver beliefs are consistent with sender strategies and sender strategies make sense given receiver beliefs, a countersignalling equilibrium exists in which Highs show off their conﬁdence by not mentioning their grades