A screening game is a two-player
principal–agent type game used in
economic
An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...
and
game theoretical modeling. Principal–agent problems are situations where there are two players whose interests are not necessarily matching with each other, and where complete honesty is not optimal for one player. This will lead to strategies where the players exchange information based in their actions which is to some degree noisy. This ambiguity prevents the other player from taking advantage of the first. The game is closely related to
signaling games, but there is a difference in how information is exchanged.
In the principal-agent model, for instance, there is an employer (the principal) and a worker (the agent). The worker has a given skill level, and chooses the amount of effort he will exert. If the worker knows his ability (which is given at the outset, perhaps by nature), and can acquire credentials or somehow signal that ability to the employer before being offered a wage, then the problem is signaling. What sets apart a screening game is that the employer offers a wage level first, at which point the worker chooses the amount of credentials he will acquire (perhaps in the form of education or skills) and accepts or rejects a contract for a wage level. It is called screening, because the worker is screened by the employer in that the offers may be contingent on the skill level of the worker.
Some economists use the terms signaling and screening interchangeably, and the distinction can be attributed to Stiglitz and Weiss (1989).
See also
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Cheap talk
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Game theory
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Incomplete information
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Signalling (economics)
In contract theory, signalling (or signaling; see spelling differences) is the idea that one party (the agent) credibly conveys some information about itself to another party (the principal).
Although signalling theory was initially develope ...
*
Signalling theory
Within evolutionary biology, signalling theory is a body of theoretical work examining communication between individuals, both within species and across species. The central question is when organisms with conflicting interests, such as in se ...
References
*Stiglitz, Joseph and Andrew Weiss (1989) “Sorting out the Differences Between Screening and Signalling Models,” in Papers in Commemoration of the Economic Theory Seminar at Oxford University, edited by Michael Dempster, Oxford: Oxford University Press.
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