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Sequential Equilibria and Cheap Talk in Infinite Signaling Games

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  • Karl Iorio
  • Alejandro M. Manuelli
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    Abstract

    This paper shows the existence of sequential and weak-best-response equilibria for cheap-talk extensions of signaling games for a class of signaling games called communication-impervious. An example shows there are well-behaved infinite signaling games with no sequential equilibria. The assumption that talk is cheap seems reasonable in many economic contexts and yields a very straightforward solution to the existence problem in infinite signaling games. The cheap-talk assumption opens the possibility of extending the methods of this paper to prove the existence of equilibrium in more-general extensive-form games with infinite action and information sets.

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    Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 915.

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    Date of creation: Dec 1990
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    Handle: RePEc:nwu:cmsems:915

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    1. Hellwig, Martin & Leininger, Wolfgang, 1987. "On the existence of subgame-perfect equilibrium in infinite-action games of perfect information," Journal of Economic Theory, Elsevier, vol. 43(1), pages 55-75, October.
    2. Joseph Farrell & Bob Gibbons, 1986. "Cheap Talk in Bargaining Games," Working papers 422, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
    4. repec:cdl:econwp:2061333 is not listed on IDEAS
    5. Simon, Leo K. & Stinchcombe, Maxwell B., 1987. "Extensive From Games in Continuous Time: Pure Strategies," Department of Economics, Working Paper Series qt03x115sh, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    6. Aumann, Robert J., 1974. "Subjectivity and correlation in randomized strategies," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 67-96, March.
    7. Banks, Jeffrey S. & Sobel, Joel., 1985. "Equilibrium Selection in Signaling Games," Working Papers 565, California Institute of Technology, Division of the Humanities and Social Sciences.
    8. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
    9. Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
    10. Forges, Francoise M, 1986. "An Approach to Communication Equilibria," Econometrica, Econometric Society, vol. 54(6), pages 1375-85, November.
    11. Sudipto Bhattacharya, 1979. "Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 259-270, Spring.
    12. Harris, Christopher J, 1985. "Existence and Characterization of Perfect Equilibrium in Games of Perfect Information," Econometrica, Econometric Society, vol. 53(3), pages 613-28, May.
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