ISBN:
0444894276
Content:
This chapter presents some of the main developments in the theory of market signaling and its connection to noncooperative game theory. One of the most important applications of game theory to micro-economics has been in the domain of market signaling. The standard story is a simple one: for example, two parties wish to engage in exchange; the owner of a used car wants to sell the car to a potential buyer. One party has information (e.g., the seller knows the quality of the car) that the other lacks. The quality of a car is outside of the control of the owner and quality depends on things done or undone at the factory when the car was assembled. Under certain conditions, the first party wishes to convey that information to the second. But direct communication of the information is for some reason impossible, and the first party must engage in some activity that indicates to the second what the first knows; e.g., the owner of a good car will offer a limited warranty. The range of applications for this story is largefor example, a worker wishing to signal his or her ability to a potential employer and using education as a signal, an insuree who is relatively less risk prone signaling this to an insurer by accepting a larger deductible or only partial insurance, and a firm that is able to produce high-quality goods signaling this by offering a warranty for the goods sold.
In:
Handbook of game theory with economic applications, Amsterdam : North-Holland, 1994, (1994), Seite 849-867, 0444894276
In:
9780444894274
In:
year:1994
In:
pages:849-867
Language:
English
DOI:
10.1016/S1574-0005(05)80057-8
URL:
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