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Theory Name

  • Signaling Theory


  • N/A

Alternate name(s)

  • Signaling

Main dependent construct(s)/factor(s)

  • Job outcome, price premium

Main independent construct(s)/factor(s)

  • signals such as education (job applicants), warranty (products)

Concise description of theory

  • In economics, more precisely in contract theory, signaling is the idea that one party (termed the agent) credibly conveys some information about itself to another party (the principal). For example, in Michael Spence's job-market signalling model, (potential) employees send a signal about their ability level to the employer by acquiring certain education credentials. The informational value of the credential comes from the fact that the employer assumes it is positively correlated with having greater ability.
  • In the IS literature, signaling theory has been used to study how IT artifacts and Non-IT mechanisms could mitigate consumers' uncertainty about sellers and products.

Diagram/schematic of theory

Originating author(s)

  • Michael Spence

Seminal articles

  • Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 355-374.

Originating area

  • Economics

Level of analysis

  • Individual, product, firm

Links to WWW sites describing theory

Links from this theory to other theories

  • Uncertainty theory, asymmetric information

IS articles that use the theory

  • Dimoka, A., Hong, Y., & Pavlou, P. A. (2012). On product uncertainty in online markets: theory and evidence. MIS Quarterly36(2), 395-426.
  • Ghose, A. (2009). Internet exchanges for used goods: An empirical analysis of trade patterns and adverse selection. Mis Quarterly, 263-291.


Date last updated

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