Credible signals: A refinement of perfect Bayesian equilibria

Jorge Streb ()

No 674, CEMA Working Papers: Serie Documentos de Trabajo. from Universidad del CEMA

Abstract: Signals are voluntary actions a sender may use to reveal its type. When this simple insight is formalized, a bewildering plethora of perfect Bayesian equilibria arise. In particular, separating equilibria are possible when no type has an incentive to separate and pooling equilibria are possible when all types do. This motivates a refinement for signaling games. A deviation from an equilibrium is credible if and only if it forms part of an alternative equilibrium where payoffs (weakly) increase. The self-selection condition then puts zero probability, when possible, on sender types for which a deviation from equilibrium is not credible. Las señales son acciones voluntarias del emisor para revelar su tipo. Cuando esto se formaliza, surge una plétora de equilibrios bayesianos perfectos. Son posibles equilibrios con diferenciación a pesar de que nadie tiene un incentivo para diferenciarse y equilibrios con mimetización a pesar de que todos sí lo tienen. Esto motiva un refinamiento para juegos de señales. Un desvío de un equilibrio es creíble si y solo si forma parte de un equilibrio alternativo donde los pagos aumentan (en sentido débil). La condición de autoselección pone probabilidad cero a los tipos para los cuáles un desvío no es creíble.

Keywords: perfect Bayesian equilibrium; refinement; signals; credible deviations; self-selection condition (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2018-12
New Economics Papers: this item is included in nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:cem:doctra:674

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