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Signaling Games and Stable Equilibria

Signaling Games and Stable Equilibria Abstract Games in which one party conveys private information to a second through messages typically admit large numbers of sequential equilibria, as the second party may entertain a wealth of beliefs in response to out-of-equilibrium messages. By restricting those out-of-equilibrium beliefs, one can sometimes eliminate many unintuitive equilibria. We present a number of formal restrictions of this sort, investigate their behavior in specific examples, and relate these restrictions to Kohlberg and Mertens' notion of stability. * " We are grateful to Anat Admati, Drew Fudenberg, Elon Kohlberg, Paul Milgrom, Richard McKelvey, Jean-Francois Mertens, Motty Perry, John Roberts, Joel Sobel, Gyu Ho Wang, and especially Hugo Sonnenschein for helpful discussion, and to three referees and an editor for helpful suggestions. The financial support of Harvard University, the Korea Foundation for Advanced Studies, the National Science Foundation (Grants SES80-06407 and SES84-05865), the Sloan Foundation, and the Institute for Advanced Studies at the Hebrew University, are all gratefully acknowledged. The material in this paper originally appeared in two separate papers, one with the above title, and a second entitled “More Signaling Games and Stable Equilibria.” We hope that anachronistic references to the earlier incarnations of these ideas will not prove too troublesome to the reader. This content is only available as a PDF. © 1987 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Quarterly Journal of Economics Oxford University Press

Signaling Games and Stable Equilibria

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Publisher
Oxford University Press
Copyright
© 1987 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
ISSN
0033-5533
eISSN
1531-4650
DOI
10.2307/1885060
Publisher site
See Article on Publisher Site

Abstract

Abstract Games in which one party conveys private information to a second through messages typically admit large numbers of sequential equilibria, as the second party may entertain a wealth of beliefs in response to out-of-equilibrium messages. By restricting those out-of-equilibrium beliefs, one can sometimes eliminate many unintuitive equilibria. We present a number of formal restrictions of this sort, investigate their behavior in specific examples, and relate these restrictions to Kohlberg and Mertens' notion of stability. * " We are grateful to Anat Admati, Drew Fudenberg, Elon Kohlberg, Paul Milgrom, Richard McKelvey, Jean-Francois Mertens, Motty Perry, John Roberts, Joel Sobel, Gyu Ho Wang, and especially Hugo Sonnenschein for helpful discussion, and to three referees and an editor for helpful suggestions. The financial support of Harvard University, the Korea Foundation for Advanced Studies, the National Science Foundation (Grants SES80-06407 and SES84-05865), the Sloan Foundation, and the Institute for Advanced Studies at the Hebrew University, are all gratefully acknowledged. The material in this paper originally appeared in two separate papers, one with the above title, and a second entitled “More Signaling Games and Stable Equilibria.” We hope that anachronistic references to the earlier incarnations of these ideas will not prove too troublesome to the reader. This content is only available as a PDF. © 1987 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Journal

The Quarterly Journal of Economics – Oxford University Press

Published: May 1, 1987

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