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- Title
The Welfare Cost of Signaling.
- Authors
Fan Yang; Harstad, Ronald M.
- Abstract
Might the resource costliness of making signals credible be low or negligible? Using a job market as an example, we build a signaling model to determine the extent to which a transfer from an applicant might replace a resource cost as an equilibrium method of achieving signal credibility. Should a firm's announcement of hiring for an open position be believed, the firm has an incentive to use a properly-calibrated fee to implement a separating equilibrium. The result is robust to institutional changes, outside options, many firms or many applicants and applicant risk aversion, though a sufficiently risk-averse applicant who is sufficiently likely to be a high type may lead to a preference for a pooling equilibrium.
- Subjects
ECONOMIC equilibrium; EXTERNALITIES; INFORMATION asymmetry; TRUTHFULNESS &; falsehood; LABOR incentives
- Publication
Games (20734336), 2017, Vol 8, Issue 1, p11
- ISSN
2073-4336
- Publication type
Article
- DOI
10.3390/g8010011