Project title Signaling under Stategic Interaction in the Classroom
Duration  10 weeks

We analyse a model in which a student and a professor interact in the classroom to signal their quality to a third party---i.e., their labour markets. The student has a given type, which is private information and is related to her cognitive ability. They take costly effort to increase her grade. The professor has a given innate ability (e.g., his quality as an academic) and choose a difficulty level for their assessment tasks. Given the student’s type and the difficulty level chosen by the professor, the student’s effort maps into a grade. The labour market observes the grade of the student and the difficulty level chosen by the professor (think of a world in which the market has access to the course ECP), and makes an inference about the student’s type. Based on this inference, the market establishes a wage for the student. Likewise, a dean observes the difficulty level of the professor and the grade of the student. Based on this inference, the dean tries to make an inference about the professor’s type to establish his compensation scheme. Therefore, we analyse a signalling game in which the signal the student sends to her market depends on the action of the professor, and the action the professor sends to the dean depends on the action of the student.

We aim to characterize the equilibrium of the signalling game in terms of the effort exerted by the student, the difficulty level set by the professor, the wages paid, the costs incurred, and the welfare generated. Armed with this equilibrium concept, we aim to analyse the three modalities use around the world to administrate exams in a course: (i) the so-called UK modality, in which the professor administers only one examination; (ii) the so-called US modality, in which the professor administers one mid-term examination and one final examination, and the grades of the mid-term examination are known by the professor before designing the final; and (iii) the so-called Australian modality, in which the professor administers a mid-term examination and a final examination, but the professor does not the grade of the student before designing the final examination. Our goal is to determine which modality serves better the purpose of maximizing the student’s effort, the quality set by the professor, and the wage determined in the market.

Expected outcomes & deliverables

Applicants will be introduced to the information literature. This literature deals with problems in which agents have to send a message about her private information to a receptor, and a receptor takes an action that affects both they payoff of the sender and the payoff of the receptor. Examples in this literature include the design of platforms in electoral competitions, choice of offers in bargaining, design of advertising campaigns, choice of bids in take-over auctions, and litigation schemes in jury trials, among many others. These topics are of high interest for policy makers in Australia since they provide suitable models to analyse and predict human and firm behaviour under uncertainty. Moreover, this project offers the applicants the possibility to develop a wide research agenda.

Applicants will also be trained on how to approach a very applied problem with the rigour of microeconomic techniques. Specially those related to game theory, information economics and optimization.

Applicants will also learn how to develop algorithms for matching problems in Python, Matlab or any related language.

We expect to the applicants to be able to do a review of literature, understand the essence of the problem, work with easy examples, write algorithms for those examples, and read proofs when necessary.

Student qualities

The project is suitable for a student with a background in economics, applied mathematics or computer science. Preferably (but not necessary), students who have taken intermediate (advanced) microeconomics as undergraduates. Students with abilities to program in Python or Matlab or a similar language, will be given priority.

Primary supervisor

Dr Allan Hernandez-Chanto and Dr Metin Uyanik

Further information

Candidates interests in applying to the project can write to or, if they have specific inquiries about the project.