Header

UZH-Logo

Maintenance Infos

Signaling to experts


Kurlat, Pablo; Scheuer, Florian (2017). Signaling to experts. NBER Working papers 23817, National Bureau of Economic Research.

Abstract

We study competitive equilibrium in a signaling economy with heterogeneously informed buyers. In terms of the classic Spence (1973) model of job market signaling, firms have access to direct but imperfect information about worker types, in addition to observing their education. Firms can be ranked according to the quality of their information, i.e. their expertise. In equilibrium, some high type workers forgo signaling and are hired by better informed firms, who make positive profits. Workers’ education decisions and firms’ use of their expertise are strategic complements, allowing for multiple equilibria. We characterize wage dispersion and the extent of signaling as a function of the distribution of expertise among firms. The market can create insufficient or excessive incentives for firms to acquire information, and we provide a formula to measure this inefficiency. Our model can also be applied to a variety of other signaling problems, including securitization, corporate financial structure, insurance markets, or dividend policy.

Abstract

We study competitive equilibrium in a signaling economy with heterogeneously informed buyers. In terms of the classic Spence (1973) model of job market signaling, firms have access to direct but imperfect information about worker types, in addition to observing their education. Firms can be ranked according to the quality of their information, i.e. their expertise. In equilibrium, some high type workers forgo signaling and are hired by better informed firms, who make positive profits. Workers’ education decisions and firms’ use of their expertise are strategic complements, allowing for multiple equilibria. We characterize wage dispersion and the extent of signaling as a function of the distribution of expertise among firms. The market can create insufficient or excessive incentives for firms to acquire information, and we provide a formula to measure this inefficiency. Our model can also be applied to a variety of other signaling problems, including securitization, corporate financial structure, insurance markets, or dividend policy.

Statistics

Citations

Dimensions.ai Metrics

Altmetrics

Downloads

6 downloads since deposited on 26 Jan 2018
6 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D4, D5, D8, G1, G2, H2, J2, J3, L1, L2, M3, M50
Language:English
Date:September 2017
Deposited On:26 Jan 2018 13:41
Last Modified:30 Jul 2018 06:15
Series Name:NBER Working papers
Number of Pages:63
OA Status:Green
Publisher DOI:https://doi.org/10.3386/w23817
Related URLs:http://www.nber.org/papers/w23817

Download

Content: Published Version
Filetype: PDF - Registered users only
Size: 906kB
View at publisher
Download PDF  'Signaling to experts'.
Preview
Content: Accepted Version
Filetype: PDF
Size: 930kB