Does Signaling Solve the Lemon’s Problem?
Maybe. Lemon’s and signaling models generally deal with different welfare problems, the former with withdrawal of high quality sellers, and the latter with socially wasteful signals. However, with asymmetric information, high productivity workers may not (absent signaling) be employed where they are valued the most. If one’s productivity is known in alternative employment, signaling that overcomes the lemon’s problem at a cost will only occur if it increases welfare. If individual productivity is unknown in alternative employment, again signaling may occur and will overcome the lemon’s problem, but it may lower welfare. Key Words: Lemons, signaling, and sorting
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.business.appstate.edu/departments/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
- Fuchs, William & Skrzypacz, Andrzej, 2013. "Costs and Benefits of Dynamic Trading in a Lemons Market," Research Papers 2133, Stanford University, Graduate School of Business.
- Kyungmin Kim, 2012. "Endogenous market segmentation for lemons," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 562-576, 09.
- Timothy Perri, 2011. "Spence Revisited: Signaling and the Allocation of Individuals to Jobs," Working Papers 11-16, Department of Economics, Appalachian State University.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- John G. Riley, 1976.
UCLA Economics Working Papers
071, UCLA Department of Economics.
- Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
- Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, July.
When requesting a correction, please mention this item's handle: RePEc:apl:wpaper:13-13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (O. Ashton Morgan)
If references are entirely missing, you can add them using this form.