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Learning to signal in markets

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  • Nöldeke, Georg
  • Larry Samuelson

Abstract

We formulate a dynamic learning-and-adjustment model of a market in which sellers choose signals that potentially reveal their types. If the dynamic process selects a unique limiting outcome, then that outcome must be an undefeated equilibrium; though to be undefeated does not suffice to be the sole limiting outcome. If a Riley outcome exists that provides "high" type sellers with a higher utility than any other equilibrium outcome, then that outcome is the unique limiting outcome of our model. In the absence of a Riley outcome, or if high type workers obtain higher utility in a pooling equilibrium than in the Riley outcome, a unique limit outcome will only emerge under very stringent conditions. If these conditions fail, the market will cycle between various equilibria and, possibly, nonequilibrium outcomes

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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 271.

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Length: pages
Date of creation: 1994
Date of revision:
Handle: RePEc:bon:bonsfb:271

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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References

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  1. Noldeke Georg & Samuelson Larry, 1993. "An Evolutionary Analysis of Backward and Forward Induction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 425-454, July.
  2. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
  3. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  4. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  5. Fudenberg, Drew & Levine, David K, 1993. "Steady State Learning and Nash Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 547-73, May.
  6. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-59, March.
  7. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-61, May.
  8. Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
  9. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  10. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  11. Joseph Stiglitz & Andrew Weiss, 1990. "Sorting Out the Differences Between Signaling and Screening Models," NBER Technical Working Papers 0093, National Bureau of Economic Research, Inc.
  12. repec:att:wimass:9218 is not listed on IDEAS
  13. Fudenberg, Drew & Levine, David K, 1993. "Self-Confirming Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 523-45, May.
  14. Georg Nöldeke & Larry Samuelson, 1992. "The Evolutionary Foundations of Backward and Forward Induction," Discussion Paper Serie B 216, University of Bonn, Germany.
  15. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
  16. Ehud Kalai & Ehud Lehrer, 1991. "Private-Beliefs Equilibrium," Discussion Papers 926, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. A. Blume & Y. G. Kim & J. Sobel, 2010. "Evolutionary Stability in Games of Communication," Levine's Working Paper Archive 530, David K. Levine.
  18. Gale, Douglas, 1992. "A Walrasian Theory of Markets with Adverse Selection," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 229-55, April.
  19. Damme, E.E.C. van, 1991. "Refinements of Nash equilibrium," Discussion Paper 1991-7, Tilburg University, Center for Economic Research.
  20. Van Damme, E., 1991. "Refinements of Nash Equilibrium," Papers 9107, Tilburg - Center for Economic Research.
  21. Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, vol. 50(2), pages 381-413, April.
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Cited by:
  1. Noldeke, G. & Samuelson, L., 1996. "A Dynamic Model of Equilibrium Selection in Signaling Markets," Working papers 9518r, Wisconsin Madison - Social Systems.
  2. K.J.M. De Jaegher, 2007. "Efficient communication in the electronic mail game," Working Papers 07-11, Utrecht School of Economics.
  3. Cooper, David J., 1997. "Barometric price leadership," International Journal of Industrial Organization, Elsevier, vol. 15(3), pages 301-325, May.

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