Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Coarse Information Leads to Less Effective Signaling

Vol.29, No.3, September , 58–73



  •   (Division of Humanities and Social Sciences, POSTECH)

  •   ( School of Business Administration, Kyungpook National University)

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Abstract  

Thisstudyconsidersfirms¡¯coarseinformationaboutaworker¡¯spossible 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).


Keywords
   Job market signaling, Coarse information, Perfect Bayesian equilibrium, Extended Intuitive Criterion

JEL classification codes
   C72, D82, D83, J30
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