• Table of Contents
    • Abstract
    • Keywords
    • Article
      • Mathematical formulation
      • The basic signalling game
        • The basic screening game
        • Extensions and refinements
      • Application
        • Industrial organization
        • Finance
        • Political science
        • Social norms
        • Biology
    • See Also
    • Bibliography
    • How to cite this article

signalling and screening

Johannes Hörner
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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Signalling refers to any activity by a party designed to influence the perception and thereby the actions of other parties. This presupposes that one market participant holds private information that for some reason cannot be verifiably disclosed, and which affects the other participants’ incentives. The classic example of market signalling is due to Spence. Consider a labour market in which firms know less than workers about their innate productivity. Under certain conditions, some workers may wish to signal their ability to potential employers, and do so by choosing a level of education that distinguishes them from workers with lower productivity.
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How to cite this article

Hörner, Johannes. "signalling and screening." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 17 January 2018 <http://www.dictionaryofeconomics.com/article?id=pde2008_S000129> doi:10.1057/9780230226203.1526

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