Overeagerness

We capture the impression that high types may send lower signals than low types in order not to appear too desperate. We require a noisy one-dimensional signal, where a very low signal being transmitted forces types to execute their outside option. The central assumption is that low types are not only less productive when employed, but that they also face a worse outside option. High types then exploit low types’ eagerness not to end up with their bad outside option by running a larger risk of transmitting a very low signal.

Duke Scholars

Author Philipp Sadowski Economics