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Does signalling solve the lemons problem?

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  • Timothy Perri

Abstract

Maybe. Lemons and signalling models generally deal with different welfare problems, the former with withdrawal of high quality sellers, and the latter with socially wasteful signals. Absent signalling, with asymmetric information, high productivity workers may not be employed where they are valued the most. If one's productivity is known in alternative employment, signalling that overcomes the lemons problem will only occur if it increases welfare.

Suggested Citation

  • Timothy Perri, 2016. "Does signalling solve the lemons problem?," Applied Economics Letters, Taylor & Francis Journals, vol. 23(4), pages 227-229, March.
    • Handle: RePEc:taf:apeclt:v:23:y:2016:i:4:p:227-229
    DOI: 10.1080/13504851.2015.1066484
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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