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Task 4
Explain how the example used in the lecture illustrates the concept of signaling.
· Reading
Term: signaling
Definition: a way to signal, to demonstrate to the buyer the product has high quality
Detail: person not involved-unbiased judgement
· Listening
e.g. jewelry seller-authentic
high price, hard to evaluate
e.g. expert - sign in store-certified
sample answer:
Signaling means that when the product is high priced and difficult to evaluate, the seller would use a way to signal, to demonstrate to the buyer that the product has high quality and thus worth the price.
In the lecture, the professor used a jewelry seller’s example to illustrate the concept of signaling. The jewelry store sells expensive watches, rings and necklaces because they are authentic and real gold, diamonds, and precious gemstones. The seller wants to prove to the customers that they are real, because it’s difficult to tell. She put up a sign saying all the jewelries are certified by a leading expert, who doesn’t work for the shop. And since the expert gives an unbiased judgement, the customers would believe they are authentic and as a result, they are more willing to buy the jewelries.