hipster or homeless

Countersignaling is the behavior where agents with the highest level of a given property invest less into proving it than individuals with a medium level of the same property. This concept is primarily useful for analyzing human behavior and thus relevant to economics, sociology and psychology; there is no known animal behavior which conforms to the predictions of the countersignaling model.

Many of the things – such as toughness, cooperativeness or fertility – that people and animals want to know about each other are not directly observable. Instead, observable indicators of these unobservable properties must be used to communicate them to others. These are signals. Signaling theory deals with predicting the level of effort that individuals, the signalers, should invest to communicate their properties to other individuals, the receivers, and how these receivers interpret the signals.

Two conditions have to be fulfilled before signaling theory should be applied. First, there has to be informational asymmetry between the signaler and receiver (I know more about my own level of toughness than you do). Second, the potential for divergence or conflict of interest between the signaler and receiver. Without either of these two conditions, there is no need for signals as the problem is merely one of communication. Once these conditions are fulfilled, signals have to be used by individuals to prove to the other person their underlying hidden property.

Much research is concerned with understanding what signals signalers should send to convince a receiver that they have a certain property, and what signals a receiver should be convinced by. One way of doing this is by putting money on the table just to prove that you can; someone without the property would not be able to do the same. For example, in biology peacocks expend energy on elaborate plumage that increase their risk of dying. By doing this they demonstrate their genetic fitness, as genetically less fit males can only grow small plumage, while genetically better individuals can grow larger ones (in biology, this is known as the handicap principle). Countersignaling by contrast, is showing off by not showing off, or by playing humble. For instance the nouveau riche are known to flash their cash – champagne and fast cars – while those with old money are more understated.

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