Affiliation:
1. University of Southern California
2. University of Zurich
Abstract
Abstract
We study competitive equilibria in a signalling economy with heterogeneously informed buyers. In terms of the classic Spence (1973, The Quarterly Journal of Economics, 87, 355—374) model of job market signalling, 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 signalling and are hired by better informed firms, which make positive profits. Workers’ education decisions and firms’ use of their expertise are strategic complements, allowing for multiple equilibria that can be Pareto ranked. We characterize wage dispersion and the extent of signalling as a function of the distribution of expertise among firms. Our model can also be applied to a variety of other signalling problems, including securitization, corporate financial structure, insurance markets, or dividend policy.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics
Reference42 articles.
1. The Market for “Lemons”: Quality Uncertainty and the Market Mechanism;AKERLOF,;The Quarterly Journal of Economics,1970
2. Perfect Competition in Markets with Adverse Selection;AZEVEDO,;Econometrica,2017
3. Who Gets the Job Referral? Evidence from a Social Networks Experiment;BEAMAN,;American Economic Review,2012
4. The Valuation of Complex Derivatives by Major Investment Firms;BERNARDO,;Journal of Finance,1997
5. Tax Policy and the Dividend Puzzle;BERNHEIM,;RAND Journal of Economics,1991
Cited by
6 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献