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Signaling, screening, and core stability

Author

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  • Kamishiro, Yusuke
  • Vohra, Rajiv
  • Serrano, Roberto

Abstract

This paper provides a noncooperative approach to core stability in an economy with incomplete information. We study the perfect Bayesian equilibria of an extensive form mechanism that extends the one used by Serrano and Vohra (1997) to implement the core of a complete-information economy. This leads to a version of the core that we refer to as the sequential core, which allows for information to be transmitted among the agents during the process of coalition formation. Such information flows include proposals that can be viewed as signaling devices and/or screening contracts. Equilibrium refinements are then used to provide justifications for the coarse core and the fine core. As a robustness check, we show that the sequential core corresponds to stationary PBE outcomes of an infinite horizon bargaining game.

Suggested Citation

  • Kamishiro, Yusuke & Vohra, Rajiv & Serrano, Roberto, 2023. "Signaling, screening, and core stability," Journal of Economic Theory, Elsevier, vol. 213(C).
    • Handle: RePEc:eee:jetheo:v:213:y:2023:i:c:s0022053123001114
    DOI: 10.1016/j.jet.2023.105715
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    More about this item

    Keywords

    Core; Incomplete information; Perfect Bayesian equilibrium; Signaling; Screening; Nash program;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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