  We study the coevolution of network structure and signaling behavior. We
model agents who can preferentially associate with others in a dynamic network
while they also learn to play a simple sender-receiver game. We have four major
findings. First, signaling interactions in dynamic networks are sufficient to
cause the endogenous formation of distinct signaling groups, even in an
initially homogeneous population. Second, dynamic networks allow the emergence
of novel {\em hybrid} signaling groups that do not converge on a single common
signaling system but are instead composed of different yet complementary
signaling strategies. We show that the presence of these hybrid groups promotes
stable diversity in signaling among other groups in the population. Third, we
find important distinctions in information processing capacity of different
groups: hybrid groups diffuse information more quickly initially but at the
cost of taking longer to reach all group members. Fourth, our findings pertain
to all common interest signaling games, are robust across many parameters, and
mitigate known problems of inefficient communication.
