Skip to main content
9: Signals and Advertising
- Last updated
Save as PDF
- Explain the problems of adverse selection and moral hazard that result from information asymmetries.
- Explain the role of advertising to facilitate transactions that involve costly information, asymmetric information, or some combination of the two.
- Distinguish between default-independent and default-contingent signals, provide examples of each, and describe situations where each may be effective.
- Explain the concept of a separating equilibrium and why it is important to the functioning of economic signals.
- 9.1: Overview and Objectives
- 9.2: Asymmetric Information
- 9.3: Advertising as Information
- 9.4: Market Signals to Counteract Asymmetric Information Problems
- 9.5: A Formal Model of Signals
- 9.6: Concluding Comments
- 9.7: References
- 9.8: Problem Sets