Signaling Games

Dynamic incomplete-information games where an informed sender chooses a signal that a receiver observes.

Ask the Game theory assistant 1 min read · Updated September 9, 2026

Definition

Sender of type $\theta\in\Theta$ chooses signal $m\in M$ ; receiver observes $m$ and chooses action $a\in A$ . Payoffs $u_S(m,a,\theta)$ , $u_R(m,a,\theta)$ ; prior $p(\theta)$ .

Solution concepts: separating, pooling, and semi-separating perfect Bayesian equilibria.

Intuition

The informed party conveys information through costly action choices.

Equilibria are sustained by receiver beliefs that make deviation unprofitable for the sender.

Worked example

Spence (1973): education signals worker ability; separating equilibria have high-ability workers study more than low-ability workers would.

Costly signaling in biology (peacock tails) — the handicap principle.

The math

Intuitive criterion (Cho-Kreps) refines PBE by restricting off-path beliefs.

Single-crossing / Spence-Mirrlees condition guarantees a unique separating equilibrium.

Where it is used

Job-market signaling, advertising, political posturing, and warranty design.

Central in information economics and biology.

More in Game theory

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