Game Theory: Pooling Games

In signalling games, different "types" (e.g. high vs low quality) can send the same signal — a pooling equilibrium — or separate — a separating equilibrium. Pooling means the receiver can’t tell types apart from the signal; everyone looks the same. That often leads to a single contract, price, or offer for all, which can favour the worse type (adverse selection) or force the good type to over-invest in signalling. Founders see pooling in hiring (everyone claims the same skills), sales (every vendor promises excellence), and fundraising (every deck looks strong). The lens: when signals pool, either add a costly signal that separates or accept average terms.

When you’re the receiver (hiring, buying, investing), design screens that make signalling costly so types separate: trials, milestones, skin in the game. When you’re the sender (selling, pitching), invest in one or two credible, costly signals that separate you from the pool — proof of performance, not just claims.

Pooling: different types send the same signal, so the receiver can’t tell them apart. Use costly signals or screens to separate, or price for the average. Founders apply this in hiring, sales, and fundraising.