Signaling Fitness

Animals sometimes evolve traits that allow them to signal information. For example, when a gazelle sees a cheetah, it sometimes tries to run away for fear of being eaten. Often, however, the gazelle will instead jump 18 inches into the air when it notices a cheetah.^[5] An explanation for this behavior is that the gazelle is signaling to the cheetah that the gazelle could easily outrun the cheetah. Because the gazelle’s jump separates it from unhealthy animals, the cheetah should not waste its energies trying to kill the gazelle. A cheetah can’t directly observe its potential prey’s fitness, but it can observe its acrobatics. Assuming that the cheetah would have little chance of catching a gazelle that could perform such an acrobatic feat, the cheetah would be “rational” to not chase a jumping gazelle. If the gazelle consumes less energy jumping than running away, then jumping is an evolutionarily sound strategy.

You can use this jumping gazelle strategy to deter a potential business rival. Imagine that you are currently the only seller of snow tires in Buffalo, New York. Another firm starts trying to sell snow tires. You know that almost none of your customers would ever switch brands. You are certain that in the end, your rival would be unable to compete successfully. Unfortunately, you can’t convince your rival of his doomed fate. Because competing against even a feeble rival is costly, you desire a strategy that quickly causes your competitor to exit your market.

Normally, when you face a new competitor, it’s optimal to increase advertising to prevent any of your customers from abandoning you. What if, however, when this rival enters your market, you stop all advertising? If your rival has any chance at long-term survival, this “no advertisement” strategy would be disastrous. If, however, you are confident that no one would buy your rival’s snow tires even if you stopped advertising, then you might indeed want to stop. Your rival will realize that if he can’t beat you when you weren’t even trying that hard, he has no hope of prevailing when you start advertising again. Succeeding even without advertising is the equivalent of a gazelle’s jumping 18 inches in the air. It’s an impressive feat that should deter would-be predators.

^[5]See Gintis (2000), 307–308.