Does signalling solve the lemons problem?

Tim Perri

Applied Economics Letters, 2016, vol. 23, issue 4, 227-229

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.

Date: 2016
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Working Paper: Does Signaling Solve the Lemon’s Problem? (2013)
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DOI: 10.1080/13504851.2015.1066484

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