Cursed Job Market Signaling

Po-Hsuan Lin and Yen Ling Tan

Papers from arXiv.org

Abstract: We study how cursedness, the tendency to neglect how other people's strategies depend on their private information, affects information transmission in Spence's job market signaling game. We characterize the Cursed Sequential Equilibrium and show that as players become more cursed, the worker obtains less education -- a costly signal that does not enhance productivity -- suggesting that cursedness improves the efficiency of information transmission. However, this efficiency improvement depends on the richness of the message space. Revisiting the job market signaling experiment by K\"ubler, M\"uller, and Normann (2008), we find supportive evidence for our theory.

Date: 2025-03, Revised 2025-04
New Economics Papers: this item is included in nep-gth and nep-mic
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