Diddy On Asymmetric Information

I've heard that P. Diddy (or just "Diddy" if you are up on the culture) recently put a wanted ad for a new assistant on You Tube. After getting countless responses he's had to make people be aware of other requirements, among them a college degree.

The casual observer might wonder why an assistant to a rap mogule would ever need a college degree--what does Shakespearean literature or chemical theory have to do with getting cheesecake at three in the morning? But my students would know better. Diddy is making use of both screening and signalling.

A college degree is a signal to others that the holder is smart, mature, and dedicated (as well as possessing Diddy's lofty requirements of being able to read and write). Knowing that such a degree genuinely conveys this critical information, Diddy has decided to screen out anyone who doesn't have a degree. It is not that someone who doesn't have a degree isn't automatically smart, mature, and dedicated (and literate). Indeed, he is surely excluding valuable people by making this requirement. But his time is scarce and a degree requirement is an easy way to eliminate a great number of candidates.

The other screening he does (watching all the video applications, later phone interviews, etc) will be made much easier. And as the number of candidates narrow, the signals that they must send will become much more potent than being able to read. But these two common strategies to combat adverse selection will surely play a prominent role in Diddy's search.