Publication:
Showing off or laying low? The economics of psych-outs

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2022-02-02
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American Economic Association
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Abstract
We analyze the incentives for showing off, which we model as a costly signaling game, and study the consequences of norms against such behavior. Prior to competing in a contest, a newcomer can signal his talent to an incumbent. In equilibrium, costly signaling of ability occurs only when the newcomer is exceptionally talented. In such situations signaling benefits both contestants: the newcomer for obvious reasons; the incumbent by economizing on wasted effort in the contest. Our results rationalize the emergence of norms against showing off in settings where total effort is important. When selection efficiency matters, such norms decrease welfare
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Showing off, Norms, Selection, Contests
Bibliographic citation
Denter, P., Morgan, J., & Sisak, D. (2022). Showing Off or Laying Low? The Economics of Psych-outs. American Economic Journal: Microeconomics, 14 (1), pp. 529-580.