Screening

Mechanisms designed by the less-informed party to extract private information from the more-informed party—the demand-side complement to signaling. Insurance companies use questionnaires and deductibles to screen risk levels; employers use probation periods and work samples to screen ability; companies use tiered pricing to screen willingness to pay. Where signaling is initiated by the informed party ('look at my credentials'), screening is initiated by the uninformed party ('show me your credentials through this mechanism').

When to use it

When you need to assess quality, risk, or willingness to pay but can't directly observe these characteristics; when designing pricing strategies, hiring processes, or risk assessment systems; when information asymmetry is a core business challenge (insurance, lending, marketplaces).

How it can help

Design screening mechanisms to reveal information that people won't voluntarily disclose. Tiered pricing screens for willingness to pay: those who pay full price reveal higher valuation; those who wait for sales reveal lower valuation. In hiring, work trials screen for actual ability more effectively than interviews (which are easily gamed). The best screening mechanisms are self-selecting: they naturally separate groups without requiring anyone to explicitly disclose information.