Dynamic signaling with stochastic stakes

Sebastian Gryglewicz () and Aaron Kolb ()
Additional contact information
Sebastian Gryglewicz: Erasmus School of Economics, Erasmus University Rotterdam
Aaron Kolb: Department of Business Economics and Public Policy, Indiana University Kelley School of Business

Theoretical Economics, 2022, vol. 17, issue 2

Abstract: We study dynamic signaling in a game of stochastic stakes. Each period, a privately informed agent of binary type chooses whether to continue receiving a return that is an increasing function of both her reputation and an exogenous public stakes variable or to irreversibly exit the game. A strong type has a dominant strategy to continue. In the unique perfect Bayesian equilibrium, the weak type plays a mixed strategy that depends only on current stakes and their historical minimum, and she builds a reputation by continuing when the stakes reach a new minimum. We discuss applications to corporate reputation management, online vendor reputation, and limit pricing with stochastic demand.

Keywords: Dynamic signaling; reputation building; history dependence; exit dynamics (search for similar items in EconPapers)
JEL-codes: C73 D82 D83 (search for similar items in EconPapers)
Date: 2022-05-05
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://econtheory.org/ojs/index.php/te/article/viewFile/20220539/33798/972 (application/pdf)

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:the:publsh:3710

Access Statistics for this article

Theoretical Economics is currently edited by Federico Echenique, Mira Frick, Pablo Kurlat, Juuso Toikka, Rakesh Vohra

More articles in Theoretical Economics from Econometric Society
Bibliographic data for series maintained by Martin J. Osborne ().