The Fallback as Signal: Preserved Human Skill, Liability, and Competence Signaling in Credence-Good Markets under Improving AI

2026/08/04 by Andreas Bauer · 1 citation
Economics, Econometrics and Finance · #econ.TH

paper · pdf

49 pages, 7 figures. Ancillary files contain the full replication package (simulation code, parameters, random seeds, and every reported number). JEL: D82, D86, J24, K13, L15, O33

arxiv created 2026/08/04 · arxiv updated 2026/08/06

Abstract

Firms that deploy improving but imperfect AI must decide how much to keep human workers engaged. An agent-based version of the market reproduces the analytical thresholds under noisy beliefs, learning-by-record and worker churn.

Citations

• The Last Costly Signal: How Generative AI Collapses Competence Signaling and Why Liability Sustains Markets for Expert Services
• The Augmentation Trap: AI Productivity and the Cost of Cognitive Offloading
• From Digital Distrust to Codified Honesty: Experimental Evidence on Generative AI in Credence Goods Markets
• Generative AI without guardrails can harm learning: Evidence from high school mathematics
• The transparency dilemma: How AI disclosure erodes trust
• When combinations of humans and AI are useful: A systematic review and meta-analysis
• Generative AI at Work
• On Doctors, Mechanics, and Computer Specialists: The Economics of Credence Goods
• Signaling Games and Stable Equilibria
• Ironies of automation
• The Informational Role of Warranties and Private Disclosure about Product Quality
• Games with randomly disturbed payoffs: A new rationale for mixed-strategy equilibrium points
• Job Market Signaling
• Free Competition and the Optimal Amount of Fraud
• Investment in Human Capital: A Theoretical Analysis

Cited by

• The Institutional Window: Occupation- and Jurisdiction-Specific Calibration of Liability Signaling for Preserved Human Fallback Capability