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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society
Coarse Information Leads to Less Effective Signaling
Vol.29, No.3, September 2018, 58–73
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Guangsug Hahn
(Division of Humanities and Social Sciences, POSTECH)
Joon Yeop Kwon
( School of Business Administration, Kyungpook National University)
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Abstract
This study considers firms�� coarse information about a worker��s possible 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 refined 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 signaling may be less effective signal when firms have coarse information about a worker��s possible types compared to that in Spence (1973).
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Keywords
Job market signaling, Coarse information, Perfect Bayesian equilibrium, Extended Intuitive Criterion |
JEL classification codes
C72, D82, D83, J30 |
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