Screening
The uninformed side offers a menu of terms built so that which one you choose gives away what you are.
Often misread asUsing screening and signalling as interchangeable words, on the grounds that both end with the informed side revealed.
How to see it
The uninformed side moves first and offers a menu
Screening is the uninformed party designing a set of options so that the informed party gives itself away by choosing. An insurer offering an expensive policy with a low excess alongside a cheap one with a high excess is screening: which you pick says something about your risk. Nobody has to answer a single question honestly.
The checkThe difference is who moves first. In signalling the informed party acts and the uninformed party reads the action; in screening the uninformed party sets the menu and the informed party chooses from it.
Try itDecide which is which: a graduate putting a degree on a CV, and an airline offering a cheap fare conditional on a Saturday-night stay. Name the first mover in each, then check your labels against that.
Games that show it
Know these first
Easily confused with
Sources
- Rothschild, M. & Stiglitz, J. (1976). Quarterly Journal of Economics 90(4), 629-649.
- Laffont, J-J. & Martimort, D. (2002). Princeton University Press.