Glossary · Micro · Information economics
Signaling
When the informed side of a deal takes a costly action to reveal what it knows. A degree signals ability because it is harder for a low-ability worker to get one. A signal only works if it costs the low type more than the high type.
Also called: Spence model, separating equilibrium
Related terms
More from information economics
Definitions are the start
See the term used, not just defined.
The full course teaches every term in context, with worked examples, interactive graphs and practice questions that remember what you get wrong.