Coarse Information Leads to Less Effective Signaling
- 한국계량경제학회
- JOURNAL OF ECONOMIC THEORY AND ECONOMETRICS
- Vol.29 No.3
-
2018.0958 - 74 (17 pages)
- 5

This study considers firms’ coarse information about a worker’s pos-sible types in Spence’s (1973) job market signaling model. Using incentive compatibility constraints appropriate to coarse information, we derive perfect Bayesian equilibria, which are refined into a unique equilibrium by invoking an extension of Cho and Kreps’ (1987) Intuitive Criterion. In the unique re-fined equilibrium, a high-type worker may acquire a higher education level with a lower wage than in Spence’s (1973) model. This implies that education sig-naling may be less effective signal when firms have coarse information about a worker’s possible types compared to that in Spence (1973).
1. INTRODUCTION
2. THE MODEL
3. PERFECT BAYESIAN EQUILIBRIUM
4. REFINEMENTS OF THE PERFECT BAYESIAN EQUILIBRIA
5. MAIN IMPLICATIONS
6. CONCLUDING REMARKS
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