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The New Palgrave Dictionary of Economics pp 12314–12321Cite as

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Signalling and Screening

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Abstract

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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Authors and Affiliations

  1. http://link.springer.com/referencework/10.1007/978-1-349-95121-5

    Johannes Hörner

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  1. Johannes Hörner
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© 2018 Macmillan Publishers Ltd.

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Hörner, J. (2018). Signalling and Screening. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2097

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