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Unobserved Investment, Signaling, and Welfare

Gea M. Lee and Seung Han Yoo ()

No 1301, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: We consider a model in which each worker selects a public signal following a private investment on his quality type. Signaling then contributes to social welfare through its influence on the quality choice. We offer a rationale for the argument that there are too many high-type workers in separating equilibrium and the inefficiency can be reduced in pooling equilibrium. On the other hand, pooling equilibrium can generate too few high-type workers and the inefficiency is reduced in separating equilibrium.

Keywords: Investment; Endogenous quality; Signaling; Welfare (search for similar items in EconPapers)
JEL-codes: D63 I21 J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-edu, nep-hrm and nep-mic
Date: 2013, Revised 2017
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Persistent link: https://EconPapers.repec.org/RePEc:iek:wpaper:1301

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