Tag Archives: signalling

Food refused by the most people

Which food would the greatest fraction of the world population refuse to eat? To make the question interesting, focus on widespread food items, not „interesting” local specialties like surstromming, fermented shark, maggot cheese. My guess is that pork and beef would be the most widely refused, by Muslims and Hindus respectively. Meat in general is considered objectionable by more people than vegan dishes. Refusal of plant-based food is mostly due to allergies, so soy and wheat would be the least popular. In light of this, it is interesting that the main components of the British Airways snack box on 17 May 2020 were made of wheat and pork (Jamon Iberico and a spread made of 57% bacon and 18% pork jowl). The box replaced the usual airline meal. According to British Airways, the reason was to reduce food heating on the plane during the Covid-19 pandemic. I am not sure how reducing cooking is supposed to avoid infection, but even supposing that, the pork-based snacks do not seem optimal by any criterion.

Vegan food is generally cheaper, and among animal-source foods, chicken is the cheapest, followed by turkey. So price cannot be the reason for serving pork. Airlines may try to signal wealth or that they care about passengers by offering „premium” foods, e.g. meat, and not the cheapest kind. However, this signal is undermined by the plastic boxes for the meals, the sloppy mixture of foods in the main box and the small quantities. The goal is clearly not to feed people or to keep them healthy. It does not seem reasonable for the airline to expect that it will give passengers a good taste experience.

Popularity inequality and multiple equilibria

Suppose losing a friend is more costly for a person with few contacts than with many. Then a person with many friends has a lower cost of treating people badly, e.g. acting as if friends are dispensable and interchangeable. The lower cost means that unpleasant acts can signal popularity. Suppose that people value connections with popular others more than unpopular. This creates a benefit from costly, thus credible, signalling of popularity – such signals attract new acquaintances. Having a larger network in turn reduces the cost of signalling popularity by treating friends badly.

Suppose people on average value a popular friend more than the disutility from being treated badly by that person (so the bad treatment is not too bad, more of a minor annoyance). Then a feedback loop arises where bad treatment of others attracts more connections than it loses. The popular get even more popular, reducing their cost of signalling popularity, which allows attracting more connections. Those with few contacts do not want to imitate the stars of the network by also acting unpleasantly, because their expected cost is larger. For example, there is uncertainty about the disutility a friend gets from being treated badly or about how much the friend values the connection, so treating her or him badly destroys the friendship with positive probability. An unpopular person suffers a large cost from losing even one friend.

Under the assumptions above, a popular person can rely on the Law of Large Numbers to increase her or his popularity in expectation by treating others badly. A person with few friends does not want to take the risk of losing even them if they turn out to be sensitive to nastiness.

Multiple equilibria may exist in the whole society: one in which everyone has many contacts and is nasty to them and one in which people have few friends and act nice. Under the assumption that people value a popular friend more than the disutility from being treated badly, the equilibrium with many contacts and bad behaviour actually gives greater utility to everyone. This counterintuitive conclusion can be changed by assuming that popularity is relative, not a function of the absolute number of friends. Total relative popularity is constant in the population, in which case the bad treatment equilibrium is worse by the disutility of bad treatment.

In order for there to be something to signal, it cannot be common knowledge that everyone is equally popular. Signalling with reasonable beliefs requires unequal popularity. Inequality reduces welfare if people are risk averse (in this case over their popularity). Risk aversion further reduces average utility in the popular-and-nasty equilibrium compared to the pooling equilibrium where everyone has few friends and does not signal (acts nice).

In general, if one of the benefits of signalling is a reduction in the cost of signalling, then the amount of signalling and inequality increases. My paper “Dynamic noisy signaling” (2018) studies this in the context of education signalling in Section V.B “Human capital accumulation”.

Dark-coloured buildings and cars are silly

Many buildings in Australia, especially new developments, are black, dark grey or brown, or at least the roof is. Many cars are black (other dark colours are less prevalent). The dark colouring increases both cooling and heating costs, because it absorbs and emits solar and infrared radiation faster. In addition, the dark buildings are depressing and ugly. Dark-coloured cars are more difficult to notice, especially in low-visibility conditions, thus have more accidents. White or yellow vehicles are the safest (Lardelli-Claret et al. 2002, Solomon and King 1995).

For cars, the choice of black colour is probably caused by the owner’s desire to seem wealthy by making the car look expensive – limousines in films and popular culture are often black. For buildings, the association in people’s minds between colour and price is weak. If anything, light-coloured houses, reminiscent of Mediterranean villas and the White House, may slightly raise the owner’s status. The reason for dark-coloured roofs may be the cost – tar paper is a cheap material, easy to install. Windows may appear dark due to the one-way glass used. However, for walls, the cheapest material is usually bare concrete, as shown by its choice for purely functional structures (warehouses, barriers, piers, military buildings). For private dwellings, wood or brick may be the cheapest. Neither concrete, wood nor brick is particularly dark in colour, so the choice to build black or brown houses is puzzling. Maybe it is an architectural fad – fashions often trump practicality.

Feedback requests by no-reply emails

We value your feedback” sent from a no-reply email address shows not only that the feedback is not valued, but also that the organisation is lying. More generally, when someone’s words and deeds conflict, then this is informative about his or her lack of truthfulness. If in addition the deeds are unpleasant, then this is the worst of the four possibilities (good or bad deeds combined with honest admission or lying).

The fact of sending such no-reply feedback requests suggests that either the organisations doing it are stupid, needlessly angering customers with insincere solicitations, or believe that the customers are stupid, failing to draw the statistically correct (Bayesian) conclusion about the organisation.

Some organisations send an automated feedback request by email (Mintos) or post (Yale Student Health) in response to every inquiry or interaction, even ones that clearly did not resolve the problem. The information about the non-resolution could easily be scraped from the original customer emails, without wasting anyone’s time by asking them to fill out feedback forms. The inefficient time-wasting by sending feedback requests is again informative about the organisation.

Putting your money where your mouth is in policy debates

Climate change deniers should put their money where their mouth is by buying property in low-lying coastal areas or investing in drought-prone farmland. Symmetrically, those who believe the Earth is warming as a result of pollution should short sell climate-vulnerable assets. Then everyone eventually receives the financial consequences of their decisions and claimed beliefs. The sincere would be happy to bet on their beliefs, anticipating positive profit. Of course, the beliefs have to be somewhat dogmatic or the individuals in question risk-loving, otherwise the no-agreeing-to-disagree theorem would preclude speculative trade (opposite bets on a common event).

Governments tend to compensate people for widespread damage from natural disasters, because distributing aid is politically popular and there is strong lobbying for this free insurance. This insulates climate change deniers against the downside risk of buying flood- or wildfire-prone property. To prevent the cost of the damages from being passed to the taxpayers, the deniers should be required to buy insurance against disaster risk, or to sign contracts with (representatives of) the rest of society agreeing to transfer to others the amount of any government compensation they receive after flood, drought or wildfire. Similarly, those who short sell assets that lose value under a warming climate (or buy property that appreciates, like Arctic ports, under-ice mining and drilling rights) should not be compensated for the lost profit if the warming does not take place.

In general, forcing people to put their money where their mouth is would avoid wasting time on long useless debates (e.g. do high taxes reduce economic growth, does a high minimum wage raise unemployment, do tough punishments deter crime). Approximately rational people would doubt the sincerity of anyone who is not willing to bet on her or his beliefs, so one’s credibility would be tied to one’s skin in the game: a stake in the claim signals sincerity. Currently, it costs pundits almost nothing to make various claims in the media – past wrong statements are quickly forgotten, not impacting the reputation for accuracy much. 

The bets on beliefs need to be legally enforceable, so have to be made on objectively measurable events, such as the value of a publicly traded asset. By contrast, it is difficult to verify whether government funding for the arts benefits culture, or whether free public education is good for civil society, therefore bets on such claims would lead to legal battles. The lack of enforceability would reduce the penalty for making false statements, thus would not deter lying or shorten debates much.

An additional benefit from betting on (claimed) beliefs is to provide insurance to those harmed by the actions driven by these beliefs. For example, climate change deniers claim small harm from air pollution. Their purchases of property that will be damaged by a warming world allows climate change believers to short sell such assets. If the Earth then warms, then the deniers lose money and the believers gain at their expense. This at least partially compensates the believers for the damage caused by the actions of the deniers.

Golf as a cartel monitoring device for skilled services

Many explanations have been advanced for golf and similar costly, seemingly boring, low-effort group activities. One reason could be signalling one’s wealth and leisure by an expensive and time-consuming sport, another may be networking during a low-effort group activity that does not interfere with talking.

An additional explanation is monitoring others’ time use. A cartel agrees to restrict the quantity that its members provide, in order to raise price. In skilled services (doctors, lawyers, engineers, notaries, consultants) the quantity sold is work hours. Each member of a cartel has an incentive to secretly increase supply to obtain more profit. Monitoring is thus needed to sustain the cartel. One way to check that competitors are not selling more work hours is to observe their time use by being together. To reduce boredom, the time spent in mutual monitoring should be filled somehow, and the activity cannot be too strenuous, otherwise it could not be sustained for long enough to meaningfully decrease hours worked. Playing golf fulfills these requirements.

A prediction from this explanation for golf is that participation in time-consuming group activities would be greater in industries selling time-intensive products and services. By contrast, if supply is relatively insensitive to hours worked, for example in capital-intensive industries or standard software, then monitoring competitors’ time use is ineffective in restricting their output and sustaining a cartel. Other ways of checking quantity must then be found, such as price-matching guarantees, which incentivise customers to report a reduced price of a competitor.

Star job candidates benefit from appearing to be worse

Employers have a cost of making a job offer: filling out forms, getting approval, not being able to make other offers simultaneously in case too many job candidates accept, etc. A company who believes that it is not the top choice of candidates would want to avoid making an offer to a star applicant (one who is likely to receive better alternative offers from top employers, thus turn down the lower-ranked company’s offer).

If the star job-seeker is uncertain about the offers she or he will get, or wants a bargaining chip to use with the most preferred company, then (s)he prefers to obtain the lower-ranked employer’s offer, even when planning to reject it. A way to entice the company into offering a job is to pretend to be more attainable (have a worse outside option) by faking lower talent and potential when interviewing with lower-ranked employers. For this pretence to be (partly) credible, it must have a cost for the job-seeker, otherwise all the best candidates would pretend to be worse and increase their chance of obtaining offers from their backup employers. Then the next-best candidates would have to fake being less good to receive jobs, etc. This race to the bottom would only end once all candidates look like the worst possible, which does not seem realistic.

One potential cost is that faking lower talent has a random outcome, which may be so bad that the employer does not want to offer a job at all. This would temper the incentive to appear worse. Another cost is information leakage – if bad performance at a less desirable interview becomes known to higher-ranked employers, then the candidate may forfeit her or his most preferred interviews and jobs. It could also be that the top job-seekers cannot hide their quality, for example because their genius shines out despite their best effort, or employers base offers solely on recommendation letters, which the candidate cannot see or affect around the time of applying.

Why rational agents may react negatively to honesty

Emotional people may of course dislike an honest person, just because his truthful opinion hurt their feelings. In contrast, rational agents’ payoff cannot decrease when they get additional information, so they always benefit from honest feedback. However, rational decision makers may still adjust their attitude to be more negative towards a person making truthful, informative statements. The reason is Bayesian updating about two dimensions: the honesty of the person and how much the person cares about the audience’s feelings. Both dimensions of belief positively affect attitude towards the person. His truthful statements increase rational listeners’ belief about his honesty, but may reduce belief in his tactfulness, which may shift rational agents’ opinions strongly enough in the negative direction to outweigh the benefit from honesty.

The relative effect of information about how much the person cares, compared to news about his honesty, is greater when the latter is relatively more certain. In the limit, if the audience is completely convinced that the person is honest (or certain of his dishonesty), then the belief about his honesty stays constant no matter what he does, and only the belief about tact moves. Then telling an unpleasant truth unambiguously worsens the audience’s attitude. Thus if a reasonably rational listener accuses a speaker of „brutal honesty” or tactlessness, then it signals that the listener is relatively convinced either that the speaker is a liar or that he is a trustworthy type. Therefore an accusation of tactlessness may be taken as an insult or a compliment, depending on one’s belief about the accuser’s belief about one’s honesty.

If tact takes effort, and the cost of this effort is lower for those who care about the audience’s emotions, then pleasant comments are an informative signal (in the Spence signalling sense) that the speaker cares about the feelings of others. In that case the inference that brutal honesty implies an uncaring nature is correct.

On the other hand, if the utility of rational agents only depends on the information content of statements, not directly on their positive or negative emotional tone, then the rational agents should not care about the tact of the speaker. In this case, there is neither a direct reason for the speaker to avoid unpleasant truths (out of altruism towards the audience), nor an indirect benefit from signalling tactfulness. Attitudes would only depend on one dimension of belief: the one about honesty. Then truthfulness cannot have a negative effect.

Higher order beliefs may still cause honesty to be interpreted negatively even when rational agents’ utility does not depend on the emotional content of statements. The rational listeners may believe that the speaker believes that the audience’s feelings would be hurt by negative comments (for example, the speaker puts positive probability on irrational listeners, or on their utility directly depending on the tone of the statements they hear), in which case tactless truthtelling still signals not caring about others’ emotions.

Claims that tickets are running out

Both for paid and free events, the organisers often advertise that only a few tickets or places remain. The ad sometimes explicitly tells the viewer to register or buy now. Such advertising is costly, so there should be a benefit to the organiser. If the tickets have already sold out, then the benefit is zero, or at least smaller than if the event is not fully booked. The positive benefit from advertising a sold-out event is to build reputation for the future as an organiser of popular events, similarly to real estate agents putting a „Sold” sign in front of a house on which they closed the deal.

Given that the benefit of costly advertising is smaller when no tickets remain, some sellers should decide to advertise if and only if the event has not sold out. More generally, the probability of advertising should increase in the number of tickets remaining. In this case, rational buyers should treat advertisements saying that limited spaces remain as signals of the opposite – frequent ads show a desperate seller facing low demand. If most buyers think this way, then such advertising is counterproductive, because buyers want to delay their purchases when the probability of being able to buy in the future is large enough. The option value of waiting comes from the possibility that the buyer’s preferences change – a better event may become available, or some emergency may prevent the buyer from attending. Getting a refund for a ticket already bought is at least a hassle and may even be impossible.

The widespread claims of limited space remaining suggest that these ads boost purchases. One reason may be buyer attention – ads make them notice the opportunity to buy, which some of them wish to take advantage of. However, any ads draw attention to the event, so raising awareness cannot be the reason for the specific claim that tickets are running out.

For most events, buyers do not want to coordinate with the largest possible crowd, only with their friends, so do not prefer a fully booked event to a half-full one. Thus claims that the event is almost sold out are difficult to explain by the seller trying to coordinate buyer actions.

Some irrationality of buyers or the seller seems necessary to explain messages that demand is low. Either the buyers take the claim literally instead of using Bayes’ rule to infer the opposite, or the seller advertises despite ads decreasing demand.

It is an empirical question whether the target audience of ads saying that space is running out interprets these as signalling high or low demand, and whether these messages make people delay their purchase or speed it up.

Mugs, pens and USB sticks as advertisements

Several universities I have visited give free mugs to seminar speakers as advertisements for themselves. Similar branded objects (pens, USB sticks, T-shirts, baseball caps) are handed out by firms and political campaigns as part of their marketing.

The idea of giving people practical objects instead of flyers, junk mail or banners is to make the recipients use these objects (as opposed to throwing these away or storing them at the back of a closet), preferably in a public setting, and thus increase the visibility of the advertiser. For this, the more usable the handout, the better.

Unfortunately, the people ordering these objects in bulk and paying for the brand logo to be printed on these are busy administrators who do not connect the overall purpose the marketing campaign to the properties of the objects. Specifically, the mugs should have a large handle that lets more than two fingers hold it, the mug should be short with a wide mouth for easy filling and washing, and should not be too fragile.

Pens should write well and be ergonomical, not angular or too narrow. I have seen branded pens violating all these suggestions. For example, the Australian National University pens are of flimsy plastic, create ink splotches and the ink runs out quickly.

The USB sticks handed out by the University of Queensland had a metal cover which increased the USB drive’s bulk and scratchiness. Also, the USB was wide and thick, making it impossible to plug in side by side with another USB. The small capacity of the USB was also behind the times.

To advertise with an object, it would make sense to print the advertiser’s name and other relevant information in large readable font on the object. The logo is not useful unless it is already widely known by the target audience and associated with the advertiser. The readability suggestion is violated by the Singapore Management University’s mug, which has SMU written on it in complicated calligraphic script that is difficult to decipher even for someone who knows what the abbreviation SMU means.

For people to develop a positive view of the advertiser, the object should not seem too cheap or bad quality. By contrast, most free T-shirts are the cheapest ones that could be bought wholesale, made of the most threadbare and transparent cotton, which discourages their use.