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  5. Self-Reported Signaling

Self-Reported Signaling

Abstract

In many real-world settings, an action that affects the value of a product or service is self-reported rather than publicly observable. We investigate self-reporting when self-reports serve as a signal of sender productivity. In our model, a sender chooses an action, and then sends a message concerning the action to multiple receivers. Receivers then bid for the sender’s service after deciding whether to audit the sender. We find that self-reporting can reverse the standard result in signaling models that there is overinvestment in the action, and that the possibility of misrepresentation may in fact improve welfare given self-reported signaling.

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