Abstract
This paper studies the benefit in using signaling by
an information seller holding information that can
completely disambiguate some uncertainty concerning the state of the world for the information
buyer. We show that a necessary condition for having the information seller benefit from signaling in
this model is having some “seed of truth” in the
signaling scheme used. We then introduce two natural signaling mechanisms that adhere to this condition, one where the seller pre-commits to the signaling scheme to be used and the other where she
commits to use a signaling scheme that contains a
“seed of truth”. Finally, we analyze the equilibrium resulting from each and show that, somehow
counter-intuitively, despite the inherent differences
between the two mechanisms, they are equivalent
in the sense that for any equilibrium associated with
the maximum revenue in one there is an equilibrium offering the seller the same revenue in the
other