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International Tax and Public Finance

Erschienen in:

01.10.2016

Signaling, network externalities, and subsidies

verfasst von: Bruno De Borger, Amihai Glazer

Erschienen in: International Tax and Public Finance | Ausgabe 5/2016

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Abstract

A signal may be more effective the greater the number of people who use the same signal, thereby creating a network externality and potentially generating multiple equilibria. A subsidy to the signal can increase efficiency, and the signalers may benefit from the subsidy even if they pay taxes to finance it. But people who benefit from the signal may oppose too large a subsidy, because a large subsidy could destroy the signaling value.

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Extensions of the standard model can, however, generate externalities. For example, in the classic model of education as a signal of high ability, the greater the number of people viewed as having high ability, the lower the wage for such people. An increase in the number of signalers will then reduce the utility or wage of any person who does use the signal.

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Titel: Signaling, network externalities, and subsidies
verfasst von: Bruno De Borger
Amihai Glazer
Publikationsdatum: 01.10.2016
Verlag: Springer US
Erschienen in: International Tax and Public Finance / Ausgabe 5/2016
Print ISSN: 0927-5940
Elektronische ISSN: 1573-6970
DOI: https://doi.org/10.1007/s10797-015-9384-x

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