Signaling
Action taken by the better-informed party in an information asymmetry to credibly reveal information the less-informed party cannot directly observe — a used-car seller offering a warranty, a peacock growing an elaborate tail, a job candidate completing a demanding degree. Effective signaling depends on the signal being costly enough that a lower-quality sender could not afford to fake it.
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Costly Signal
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Screening
Action taken by the less-informed party in an information as...
Information asymmetry
A situation in which one party to a transaction has more or ...