 Separating equilibrium in quasi-linear signaling gamesJiwoong Lee (), Rudolf Müller and Dries Vermeulen No 26, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE) 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. We show that, when the set of the sender's type is finite, the collection of separating signaling functions forms a lower bounded lattice. We describe an algorithm to compute separating equilibrium strategies. 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 the standard job market signaling model of Spence (a model not captured by earlier papers) and principal-agent models with production. Date: 2014-01-01 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2014026 Access Statistics for this paper More papers in Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE) Contact information at EDIRC. |
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