Saddle Point
Back to the cover

Part I · Foundations

  1. 0 Mathematical Foundations
  2. 1 Observation, Beliefs, and Decision

Part II · Engines

  1. 2 Competing for Allocation: The Blotto Game
  2. 3 Bargaining, Commitment, and Repeated Cooperation
  3. 4 Signals, Disclosure, and Persuasion
  4. 5 Different Models of One Game
  5. 6 Leadership and Rules: Inspection
  6. 7 Decisions in Time
  7. 8 Many Agents
  8. 9 Networks, Dependence, and Resilience
  9. 10 Aggregating Information

Part III · Systems

  1. 11 Architecture of Decision Support
  2. 12 Simulation and Wargaming with AI Agents

Part IV · Limits

  1. 13 Where the Mathematics Stops
A. Michael Spence, 2008

Chapter 4 · Signals, Disclosure, and Persuasion

A. Michael Spence

born 1943

Photograph: Robert Scoble, Michael Spence, 23 January 2008, Wikimedia Commons, CC BY 2.0 (https://creativecommons.org/licenses/by/2.0/). Shown toned. File and licence

The problem on the desk

An employer cannot directly observe a new applicant’s productivity. Spence asked how observable, costly choices could convey information, and what patterns of wages and educational investment would sustain that interpretation.1

A life in moments

  1. 1943

    Montclair

    Born in 1943.2

  2. 1966

    Princeton University · Princeton

    Completed a bachelor’s degree in philosophy.3

  3. 1968

    University of Oxford · Oxford

    Completed his mathematics studies.3

  4. 1972

    Harvard University · Cambridge

    Completed his economics doctorate on market signalling.4

  5. 1973

    Stanford University · Stanford

    Joined Stanford’s faculty for his first appointment there.5

  6. 1990

    Stanford Graduate School of Business · Stanford

    Became dean; served through 1999.5

  7. 2001

    Shared the economics prize with George Akerlof and Joseph Stiglitz.2

Every line rests on a dated source (numbered below) unless it carries a mark: R for an inference, S for a story as told.

In their own words

To hire someone, then, is frequently to purchase a lottery.

Job Market Signaling, 19737

A story

The paper begins by signalling

Spence opens his 1973 article by considering his own relationship with the reader. A writer expecting future readers has different incentives from someone appearing only once. He then turns to job applicants who rarely return to the same market.6

Around Spence

  • doctoral advisor Kenneth J. Arrow MGP records Arrow as one of Spence’s doctoral advisors.8
  • doctoral advisor Thomas C. Schelling MGP records Schelling as one of Spence’s doctoral advisors.8

Advisors in the record Kenneth Joseph Arrow, Thomas Crombie Schelling Students in the record Martin Perry Mathematics Genealogy Project record

The genealogy lists only what the database records; a missing name is not a missing teacher.

The card in the book

Economist who studied at Princeton, Oxford and Harvard, where he received his doctorate. He developed the theory of market signalling — how an informed party can credibly convey its type by an action that is costlier for other types — and taught at Harvard and Stanford, where he was dean of the Graduate School of Business. He shared the 2001 Nobel Memorial Prize in Economic Sciences with George Akerlof and Joseph Stiglitz for analyses of markets with asymmetric information.

Main works “Job market signaling” (Quarterly Journal of Economics 87, 1973); Market Signaling: Informational Transfer in Hiring and Related Screening Processes (1974).

To read further

Sources (8)
  1. Job Market Signaling, Michael Spence, 1973; pp. 356–358
  2. The Prize in Economic Sciences 2001: press release, Royal Swedish Academy of Sciences, 2001; Biographical paragraph for A. Michael Spence; award statement
  3. Professor A Michael Spence, Chinese University of Hong Kong, 2004; Education and academic career
  4. Job Market Signaling, Michael Spence, 1973; p. 355, first footnote
  5. Michael Spence, Stanford Graduate School of Business; Biography; indexed institutional text
  6. Job Market Signaling, Michael Spence, 1973; p. 355, Introduction
  7. Job Market Signaling, Michael Spence, 1973; p. 356; “lottery” in the technical decision-theory sense
  8. Mathematics Genealogy Project: 201552, Mathematics Genealogy Project; Degree, advisor and student table

The facts on this page were gathered for the site from the sources listed, each checked against its locator; the book's card is reproduced unchanged.