Signaling game

A signaling game is a game-theoretic model of strategic communication in which an informed sender chooses a signal to send to an uninformed receiver, who then chooses an action based on that signal. The framework was introduced by Michael Spence in 1973 to model job-market signaling, where education serves as a costly signal of worker ability. In biology, signaling games model animal communication: a prey species signals its toxicity to a predator, and the predator decides whether to attack based on the signal's reliability. The equilibrium of a signaling game determines which signals can be evolutionarily or economically stable, revealing that communication is not a transfer of information but a strategic interaction in which the cost of signals disciplines their meaning. The framework extends to market signaling, credentialism in education, and third-party certification, showing that the same structural logic governs both biological and social systems.

Signaling games reveal that the stability of communication depends not on the sender's honesty but on the receiver's ability to punish deception. Where punishment is impossible, communication collapses — a principle that applies equally to biological signals, economic markets, and political discourse.