Matching Markets with Signals

A costless signaling mechanism has been proposed as a device to improve welfare in decentralized two-sided matching markets. An example of such an environment is a job market for new Ph.D. economists. We study a market game of incomplete information between firms and workers and show that costless signaling is actually harmful in some matching markets. Specifically, if agents have very similar preferences, signaling lessens the total number of matches and the welfare of firms, as well as it affects ambiguously the welfare of workers. These results run contrary to previous findings that costless signaling facilitates match formation.


Issue Date:
2009
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/50730
Total Pages:
35
JEL Codes:
C70
Series Statement:
SD
39.2009




 Record created 2017-04-01, last modified 2017-08-25

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