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Abstract

In many professional exchanges, information asymmetry is bilateral, which means that both parties hold information that the other party lacks and, as a result, both parties have the means to be opportunistic. To counter this asymmetry, both parties signal and screen information as they negotiate a consulting engagement. In this paper, we report on how a professional service provider and recipient typically use signaling and screening. The findings highlight that both parties signal and screen and withhold information and that the extent of project knowledge (tacit or explicit) affects how they do so. Tacit knowledge-centric projects have more signaling and screening events than explicit knowledge-centric projects but many of these signals actually increase the amount of information asymmetry.

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