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The Complete Idiot's Guide to Game Theory by Edward Rosenthal, Ph.D., Edward C. Rosenthal

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Reading Between the Lines

There’s an old expression, “it takes money to make money.” One sense of this saying is simply that small investments don’t generate much return while large investments do. But that’s just the mechanics of investment returns. Doesn’t money, or the lack of it, send a signal all on its own?

Signaling to Investors

Suppose you are considering a certain lawyer to represent you. When you visit her office, it is shabby and run-down. What kind of signal is that? You will be wondering, how good a lawyer is she if she can’t even afford nice furnishings in her office?
Ultimately, you’ll probably decide to seek counsel from the ritzier lawyer in the welldecorated suite instead.
To avoid this sort of rejection, the shabby lawyer ...

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