Explain the concept of signaling in game theory.

Explain the concept of signaling in game theory.

Signaling in game theory refers to the strategic communication between players in a game, where one player sends a signal to convey information about their private characteristics or intentions to another player. This communication is often done through actions, messages, or signals that may be costly or difficult to fake, making them credible and informative. Signaling helps to reduce information asymmetry and allows players to make more informed decisions in the game.