We consider extensions of games where some players have the option of signaling future actions by incurring costs. The main result is that in a class of games, if one player can incur costs, then forwards induction selects her most preferred outcome. Surprisingly, the player does not have to incur any costs to achieve this-the option alone suffices. However, when all players can incur costs, one player's attempt to signal a future action is vulnerable to a counter-signal by the opponent. This vulnerability to counter-signaling distinguishes signaling future actions from signaling types.
Bibliographical noteFunding Information:
* This is a revision of "Coordination and the Potential for Self Sacrifice," first draft dated November 1987. We thank an associate editor, a referee, and Matthew Rabin for detailed and helpful comments. Financial support from the Miller Institute, IBER, the Sloan Foundation and NSF Grant SES-8808133 are gratefully acknowledged. This work was begun while the first author was at the Graduate School of Business, Stanford University.