Screening (economics)

Screening is the uninformed party's strategic response to information asymmetry: rather than trusting the informed party's claims, the uninformed party designs tests, mechanisms, or contracts that force the informed party to reveal their type through behavior. Where signaling is initiated by the informed party, screening is initiated by the uninformed one.

Joseph Stiglitz's analysis of insurance markets is canonical: insurers cannot observe individual risk types, so they offer a menu of contracts with different deductible and premium combinations. High-risk individuals self-select into high-coverage plans; low-risk individuals accept higher deductibles for lower premiums. The market structure itself becomes a revelation mechanism.

Screening appears beyond economics. In security studies, adversaries screen for vulnerabilities by probing systems and observing responses. In organizational theory, employers screen candidates through trial tasks rather than credentials. The underlying logic is universal: when you cannot trust what someone says, design the environment so that their actions betray their type. The efficiency of screening depends on whether the test is manipulable — whether the informed party can game the screen without possessing the underlying quality it is meant to detect.