An Application of Global Games to Signalling Models

Philipp Wichardt

No 223, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: In a �rst attempt to apply the global games methodology to signalling games, Ewerhart and Wichardt (2004) analyse a beer-quiche type signalling game with additional imperfect information about the preferences of the receiver. Their approach allows them to dismiss the unreasonable pool- ing on quiche equilibrium. This paper revisits their example and discusses how an extension of the set of strategies for the sender a�ects the analy- sis. Interestingly, for an extended beer-quiche game, a unique equilibrium is selected while two equilibria are consistent with the Intuitive Criterion (Cho and Kreps, 1987). Apart from the technical analysis, potential eco- nomic applications of the results, e.g. in a context of limit pricing and entry deterrence, are indicated.

Keywords: Global Games; Signalling; Equilibrium Selection; Intuitive Criterion; Limit Pricing (search for similar items in EconPapers)
JEL-codes: C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (5)

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