Signaling in Retrospect and the Informational Structure of Markets
The paper analyses the performance characteristics of a market with incomplete and asymmetrically located information. It considers signals that carry information persistently in equilibrium from sellers to buyers, or more generally from those with more to those with less information. The issue is that signals are not terribly complicated things in games where the parties have the same incentives, i.e. where there is a commonly understood desire to communicate accurate information to each other. In markets where the issue is often undetectable or imperfectly detectable quality differentials, the alignment of incentives is typically imperfect.
Spence, M. (2001) Signaling in Retrospect and the Informational Structure of Markets, Les Prix Nobel.