It is very common to be in situations where you don’t have all the facts available. In different games, other players may have more information than you do resulting in an advantage. We have seen extreme cases from this during instances of insider trading and other types of financial fraud. In addition, those who possess the additional information may choose to conceal or reveal it depending on the situation.
An example would be shopping for a used car. When going to the dealership to purchase a used car you are at a disadvantage due less information. The dealer knows the value of the car you are looking to purchase as well as how much he or she is willing to sell it for. Although you have done much research through Kelley Blue Book, Carfax, and other sources, the dealer has more information thus ultimately having an advantage.
Depending on what other players do, remember that actions speak louder than words. Especially when games are repeated with the same players. Now depending on the type of information that somebody knows, they may choose to reveal or conceal. For example, if the information is damaging to the player, he or she will more than likely conceal it from others.
As a result, the actions they take will reveal information that is favorable to them. This is an example of signaling. They can also attempt to conceal something that would be unfavorable to them which is defined as signal jamming.
An example of signaling can be related to college education. For example, when I completed my undergrad there were a number of classes I took that were not really transferable to my job. Does that mean some of these classes were a waste of time? It depends on the overall goal of the individual. Many of us would agree that most of your skill development will be on the job. But the main point is the signaling of the college degree to potential employers.
The general idea is you have developed an aptitude to think and learn by completing your degree and that is the signal sent to employers. In addition to college education, you are also sending signals to potential employers based on your attire during the job interview. We can expand further than attire to a handshake, posture, and behavior.
What about signal jamming? Let’s imagine a scenario where you are looking to purchase a used vehicle from a private party. You go to see the vehicle and both interior and exterior of the car is clean. Do not be fooled by assuming that the current condition of the car reflects the overall quality and maintenance of the car. For all you know the car could be a lemon. The owner may be using signal jamming to paint this picture that the vehicle has been kept up well and is in great condition.
To screen this potentially misleading information it is best to have a certified mechanic investigate the vehicle before a deal is made.