Separating equilibrium in quasi-linear signaling games

Jiwoong Lee (), Rudolf Müller and Dries Vermeulen

International Journal of Game Theory, 2019, vol. 48, issue 4, No 2, 1033-1054

Abstract: Abstract Using a network approach we provide a characterization of a separating equilibrium for standard signaling games where the sender’s payoff function is quasi-linear. Given a strategy of the sender, we construct a network where the node set and the length between two nodes are the set of the sender’s type and the difference of signaling costs, respectively. Construction of a separating equilibrium is then equivalent to constructing the length between two nodes in the network under the condition that the response of the receiver is a node potential. When the set of the sender’s type is a real interval, shortest path lengths are antisymmetric and a node potential is unique up to a constant. A strategy of the sender in a separating equilibrium is characterized by some differential equation with a unique solution. Our results can be readily applied to a broad range of economic situations, such as for example the standard job market signaling model of Spence, a model not captured by earlier papers.

Keywords: Signaling game; Separating equilibrium; Node potential (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s00182-019-00677-1

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