Lesson 1
Signaling - Good and Bad Workers - Introduction
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We look at two settings with asymmetric information; one side of a game knows something that the other side does not. We should always interpret attempts to communicate or signal such information taking into account the incentives of the person doing the signaling. In the first setting, information is verifiable. Here, the failure explicitly to reveal information can be informative, and hence verifiable information tends to come out even when you don't want it to. We consider examples of such information unraveling. Then we move to unverifiable information. Here, it is hard to convey such information even if you want to. We discuss some implications of this rather pessimistic view of education. Polak, Ben. ECON 159, Game Theory, Fall 2007. Yale OpenCourseWare: Economics, Accessed 04/10/14 http://oyc.yale.edu/economics/econ-159/lecture-23 License: Creative Commons BY-NC-SA

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