Navin Kartik (Columbia University)

Title: 'Muddled Information'

Abstract: We study a model of signaling in which agents are heterogeneous on two dimensions. An agent’s natural action is the action taken in the absence of signaling concerns. Her gaming ability parameterizes the cost of increasing actions. Equilibrium behavior muddles information about both dimensions. As incentives to take higher actions increase—due to higher stakes or more easily manipulated signaling technology—more information is revealed about gaming ability, and less about natural actions. A new externality emerges: showing agents’ actions to additional observers can worsen information for existing observers. We discuss applications to credit scoring, school testing, and web search.