"It turns out that somewhere between two-thirds and three-quarters of people admit to replacing short words with longer words in their writing in an attempt to sound smarter," Oppenheimer said in an e-mail. "The problem is that this strategy backfires -- such writing is reliably judged to come from less intelligent authors.
Addendum: Another post on counter-signalling.
Starting in 1998, Los Angeles health officials began requiring restaurants to post large hygiene grades at their entrances, with a high proportion of grades being an A (see Jin and Leslie, 2003). Why was it necessary to require even A restaurants to disclose their grade? Suppose diners have their own opinions based on experience or reputation, so good restaurants tend to do well even without disclosure. In this case it is the worst restaurants within the A category who have the strongest incentive to prove that they meet basic hygiene standards. Given this incentive, disclosure of even an A grade can be interpreted by diners as a bad sign.
Or consider whether a person with a PhD should use the title “Dr.” In many environments PhDs are relatively rare so using a title is a strongly favorable signal of the person’s professional credentials and we would expect titles to be used frequently. But in other environments, such as research universities,PhDs are quite common. In some fields faculty interact frequently with non-academics so a PhD might still be worth boasting about, but in other fields most interactions are between academics who expect each other to have PhDs. In these fields using a title might then be interpreted not just as redundant, but as a signal of insecurity that the person fears being thought of as unqualified without the title.