The money-burning refinement: With an application to a political signalling game

Hans Gersbach

International Journal of Game Theory, 2004, vol. 33, issue 1, 67-87

Abstract: We define an equilibrium refinement in signalling games by allowing agents to refine the game by burning money whenever they can act. We apply the refinement in a model where the public is unsure about the ability of an agent, say a government, to foresee the effects of long-term decisions. A government with ample information about the consequences of decisions should invest either immediately or not at all. Poorly informed agents should wait for better information. We identify pooling equilibria in which excessive rush or waiting occurs. The money-burning refinement may eliminate both rash and waiting pooling equilibria, but it involves wasting money and, for high discount factors, a decrease in welfare. Copyright Springer-Verlag 2004

Keywords: C72; D72; D82; D83; Rush and delay; money-burning refinement; belief-change; signalling in politics (search for similar items in EconPapers)
Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://hdl.handle.net/10.1007/s001820400185 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jogath:v:33:y:2004:i:1:p:67-87

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/182/PS2

DOI: 10.1007/s001820400185

Access Statistics for this article

International Journal of Game Theory is currently edited by Shmuel Zamir, Vijay Krishna and Bernhard von Stengel

More articles in International Journal of Game Theory from Springer, Game Theory Society
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().