Signaling

Date posted: February 11, 2014

Sometimes it takes a long time to get to know someone at work, in school and even in personal relationships. But people have developed ways to speed this process, says N.C. State University economist Mike Walden.

“They really have. In economics, we call this signaling. It is a method by which a person or maybe a business or a buyer or an investor will try to use something that’s obvious to another entity, oftentimes it’s some physical characteristic, that communicates to that other person some … positive characteristic, they hope, of the person.

“So, for example, if you’re going to look for a job and have a job interview, many people say what you want to do is have a neat appearance; have a good, positive attitude; talk about what you can bring to the table for the firm, because oftentimes it’s hard, even by a company looking at your educational credentials and maybe your employment history, for them to really perceive what sort of package you are for them.

“In fact … many people now say that in terms of education, businesses oftentimes don’t really care what an individual has majored in in college. They just want them to have a college degree, because to them that signals something — that singles some level of competency; some ability to get through, perhaps, a rigorous college program.

“One other way that we see signaling … particularly for businesses, particularly financial firms: If you ever wondered why sometimes in a small town the banks are the most impressive buildings there? That’s because they are using that to signal their  financial solidity and their safeness.”

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