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Credible signals: A refinement of perfect Bayesian equilibria

Author

Listed:
  • Jorge M. Streb
Abstract
Signals are voluntary actions a sender may use to reveal its type. When this simple insight is formalized, a bewildering plethora of perfect Bayesian equilibria arise. In particular, separating equilibria are possible when no type has an incentive to separate and pooling equilibria are possible when all types do. This motivates a refinement for signaling games. A deviation from an equilibrium is credible if and only if it forms part of an alternative equilibrium where payoffs (weakly) increase. The self-selection condition then puts zero probability, when possible, on sender types for which a deviation from equilibrium is not credible. Las señales son acciones voluntarias del emisor para revelar su tipo. Cuando esto se formaliza, surge una plétora de equilibrios bayesianos perfectos. Son posibles equilibrios con diferenciación a pesar de que nadie tiene un incentivo para diferenciarse y equilibrios con mimetización a pesar de que todos sí lo tienen. Esto motiva un refinamiento para juegos de señales. Un desvío de un equilibrio es creíble si y solo si forma parte de un equilibrio alternativo donde los pagos aumentan (en sentido débil). La condición de autoselección pone probabilidad cero a los tipos para los cuáles un desvío no es creíble.

Suggested Citation

  • Jorge M. Streb, 2018. "Credible signals: A refinement of perfect Bayesian equilibria," CEMA Working Papers: Serie Documentos de Trabajo. 674, Universidad del CEMA.
    • Handle: RePEc:cem:doctra:674
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    File URL: https://ucema.edu.ar/publicaciones/download/documentos/674.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    perfect Bayesian equilibrium; refinement; signals; credible deviations; self-selection condition;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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    This paper has been announced in the following NEP Reports:

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