Badge Signaling
Badge signals work when socially enforced (verification prevents fraud) and when they activate identity-based loyalty.
Claim a status you can't defend, and you'll be punished.
Not all visual signals are costly to produce. Some are arbitrary 'badges' - conventional signals whose meaning is socially enforced rather than physically honest. Male house sparrows have black throat bibs ranging from small to large. Bib size predicts dominance rank: males with larger bibs win fights and access resources. But bib size is not correlated with body size, strength, or fighting ability. Instead, it's a conventional signal - a badge of status. Males with inappropriately large bibs (experimentally enlarged) are attacked aggressively by other males who 'call their bluff.' The signal is kept honest not by production costs but by social enforcement.
Business Application of Badge Signaling
Badge signals work when socially enforced (verification prevents fraud) and when they activate identity-based loyalty. USAA's military membership restriction creates badge signaling that activates in-group loyalty. Visual signals must be backed by substance.