Article ID Journal Published Year Pages File Type
9551845 Games and Economic Behavior 2005 10 Pages PDF
Abstract
Following Spence, this note provides an education signaling model to explain the phenomenon of gifted entrepreneurs who acquire less education than ordinary individuals. Two types of individuals, ordinary and gifted, are considered. Each one of them can either convince an investor to fund his enterprise or approach a competitive job market. The probability that an ordinary individual succeeds to establish a successful enterprise is smaller than that of a gifted individual irrespective of his education level. The probability of an ordinary individual succeeding increases with the level of education. In a separating equilibrium gifted individuals curtail their eduction to a level below that of the ordinary ones. This happens if the value of a successful enterprise per dollar investment is sufficiently large, on the one hand, but not too large to guarantee that the expected value of an enterprise run by an educated ordinary entrepreneur falls below the investment cost, on the other.
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Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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