While Alex is freaking out about her junior year grades, Haley doesn’t need to study because her community college asks her to bring glue sticks. Education may serve as a signal of ability instead of actual skill building, which would be shown by the requirements or competitiveness in the application process.
See more: college, education, human capital, human capital investments, signaling, signals, skill building
Claire believes Alex’s boyfriend is gay, but Alex doesn’t think that’s the case. She believes that since he invited her to prom and then they kissed, that it must mean he can’t be gay. Signaling is when one party has more information about a transaction than another, but displays some traits or “signals” to convince the other party of the true outcome.
See more: behavioral, signaling, signals
Haley is at a staff meeting. She’s worried that she hasn’t had enough good ideas lately. Her fear is that this will lead her boss to believe that she isn’t working hard on behalf of the company. Haley signals that she’s a good worker by suggesting that Gloria sell a family recipe to the company (NERP). Gloria has long held the recipe secret. The recipe is an example of private technological knowledge. The recipe is valuable to Gloria because of the family tradition. The recipe is valuable to NERP because it could give them an edge in the lifestyle industry. Will Gloria sell? (Note: Jay also makes a fantastic joke about the value of a bachelor’s degree that can be used for discussion on human capital)
See more: entrepreneurism, human capital, human capital investments, moral hazard, signaling, signals, technological knowledge
Alex is practicing her college interview for Princeton in the mirror when Haley comes in to style her hair. Princeton is an Ivy League school that is very prestigious and gets a lot of applications. Princeton does not know which applicants it should let in so it screens them. Screening is an action taken by an uninformed party in a situation characterized by adverse selection. There are many things that colleges do to screen applicants. They require high school transcripts, a certain GPA, test scores and they conduct an interview. When someone is interviewed, it’s an opportunity for them to send a signal. A signal is an action taken by an informed party in a situation characterized by adverse selection. Alex wants to signal to Princeton that she’s a good candidate for admission into the university. Haley shares her thoughts about the message that Alex is actually sending.
See more: adverse selection, asymmetric information, college, human capital, human capital investments, imperfect information, interviewing, signaling, signals
Haley is interviewing for a job and it isn’t going well. The labor market is often characterized by adverse selection – there are more candidates who are not suited for a particular job than who are well suited and it’s tough to tell them apart. Screening is an action taken by an interviewer to determine whether or not a candidate will be a good fit. Signaling is action taken by the candidate in order to demonstrate that s/he is a good fit. What examples of signaling and screening are in this scene?
See more: adverse selection, interviewing, labor, product differentiation, screening, signaling, signals