I quite like the idea of the hierarchy: are you suggesting that more senior employees would have more or less freedom to flout the dress code? I can see how TC’s ‘counter-signalling’ could work with a hierarchical structure to allow senior employees more freedom to dress casually. It’s a bit feudal but it seems plausible. I wonder if that’s actually the case; I don’t see many very senior employees of companies outside of public engagements.

Suits aren’t that much of a signal anyhow. You can wear the same suit everyday, many people would actually consider it less costly that the alternative. And plenty of people like to dress formally.

But see also counter-signaling ala Steve Jobs:

http://www.marginalrevolution.com/marginalrevolution/2006/07/countersignalin.html

As a result, how strict the dress code is should depend on:
1) How the cost increases as the dress code tightens
2) How correlated an individuals value of the job and their job performance actually are

Ultimately, the interviewing process is imperfect. We have a definite information asymmetry between employers and employees, and often the suit doesn’t play a particularly good role is signaling the quality of employees.

In the case of a pooling equilibrium we could prisoners dillema. If the employer takes people more seriously when they wear suits, then an individuals best response may be to wear a suit no matter what other people are doing. Then we end up with lots of people wearing suits, but the employers receives no information.

So in either type of eqm, we rely on this damn rule of thumb from employers, that an employee in a suit is going to be better than one not in a suit. Could it be that the workplace need for suits simply evolved during some bygone era, and is now ingrained as some type of social norm? I think so.