Designing a Competitive Monotone Signaling Equilibrium

Seungjin Han, Alex Sam and Youngki Shin

Department of Economics Working Papers from McMaster University

Abstract: A decision maker (DM) determines a set of reactions that receivers can choose before senders and receivers move in a generalized competitive signaling model with two-sided matching. The DM’s optimal design of the unique stronger monotone signaling equilibrium (unique D1 equilibrium) is equivalent to the choice problem of two threshold sender types, one for market entry and the other for pooling on the top. Our analysis sheds light on the impacts of a trade-off between matching efficiency and signaling costs, the relative heterogeneity of receiver types to sender types, and the productivity of the sender’s action on optimal equilibrium designing.

Keywords: optimal equilibrium design; monotone signaling equilibrium; stronger monotone belief; Criterion D1 (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2021-09
New Economics Papers: this item is included in nep-cta, nep-des, nep-gth, nep-isf and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2021-08

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