Honesty through repeated interactions.

ABSTRACT

In the study of signaling, it is well known that the cost of deception is an essential element for stable honest signaling in nature. In this paper, we show how costs for deception can arise endogenously from repeated interactions between individuals. Utilizing the Sir Philip Sidney game as an illustrative case, we show that repeated interactions can sustain honesty with no observable signal costs, even when deception cannot be directly observed. We provide a number of potential experimental tests for this theory which distinguish it from the available alternatives.