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Signaling with Two Correlated Characteristics

Author

Listed:
  • Seung Han Yoo

    (Department of Economics, Korea University, Seoul, Republic of Korea)

Abstract

This paper generalizes the canonical feature of signaling models that signaling costs are negatively correlated with productive capabilities. A worker has two characteristics - signaling cost (low/high) and productive capability (low/high) - each combination of which can be realized with positive probability. The main results identify one key condition to guarantee the existence of a unique (partially) separating equilibrium. This finding has new implications for the role of education or a pre-signaling stage that induces the condition to hold.

Suggested Citation

  • Seung Han Yoo, 2016. "Signaling with Two Correlated Characteristics," Discussion Paper Series 1605, Institute of Economic Research, Korea University.
    • Handle: RePEc:iek:wpaper:1605
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1605.pdf
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    References listed on IDEAS

    as
    1. Kelly Bedard, 2001. "Human Capital versus Signaling Models: University Access and High School Dropouts," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 749-775, August.
    2. Kevin Lang & David Kropp, 1986. "Human Capital Versus Sorting: The Effects of Compulsory Attendance Laws," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 609-624.
    3. John H. Tyler & Richard J. Murnane & John B. Willett, 2000. "Estimating the Labor Market Signaling Value of the GED," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 431-468.
    4. Ramey, Garey, 1996. "D1 Signaling Equilibria with Multiple Signals and a Continuum of Types," Journal of Economic Theory, Elsevier, vol. 69(2), pages 508-531, May.
    5. Seung Han Yoo, 2016. "Organizational Design with Non-Contractible Quality," Discussion Paper Series 1604, Institute of Economic Research, Korea University.
    6. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 227-252, October.
    7. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
    8. Quinzii, Martine & Rochet, Jean-Charles, 1985. "Multidimensional signalling," Journal of Mathematical Economics, Elsevier, vol. 14(3), pages 261-284, June.
    9. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Two correlated characteristics; Signaling;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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