Competitive signaling and bluffing: An empirical and normative investigation

Talia Rymon, University of Pennsylvania


Competitive signals are actions by competitors that provide indications of their intentions. Such signals may either be truthful indications of competitor's intentions, or bluffs, designed to mislead competitors to benefit the sender. This research focuses on competitive signaling interactions involving bluffing, and tries to answer the following questions: (1) to what extent do firms send bluff signals in competitive environments?; (2) what are the characteristics of bluff signals and their senders?; (3) what are the perceived characteristics of bluff signals and their senders from the receiving manager's point of view?; (4) are some managers better interpreters of competitive signals than others; what are the characteristics of such managers?; (5) how do senders and receivers interact strategically? I address these questions by conducting four related studies: In the first study, the focus is on the signal sender. In a survey of executives across product categories, I test whether firms send bluffs, and the characteristics of bluff signals and their senders. Given the sensitive nature of the topic, a statistical technique for the study of unacceptable behavior, the Randomized Response Technique, is used for data collection. Building on the results of the first study, I focus on the signal receiver in the second and third studies. Two measurement approaches are used for studying signal interpretation. In the second study, managers' perceptions of competitive signals are estimated using Conjoint Analysis. In the third study, the Theory of Signal Detection is used for testing managers' discrimination ability and interpretation accuracy. The stimuli for both studies are designed based on findings from the first study, and hypotheses concerning receiver characteristics as independent variables affecting signal interpretation are tested. Finally, in a fourth study, the competitive signaling interaction is analyzed using a game theoretic framework. Results from the empirical studies are incorporated into the analysis. Different strategies for both players, sender and receiver, are examined to provide normative implications for competitive signaling interactions involving bluffing.

Subject Area

Marketing|Business community

Recommended Citation

Rymon, Talia, "Competitive signaling and bluffing: An empirical and normative investigation" (1993). Dissertations available from ProQuest. AAI9413901.