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Repeated signaling games

  • Kaya, Ayça

I analyze a class of repeated signaling games in which the informed player's type is persistent and the history of actions is perfectly observable. In this context, a large class of possibly complex sequences of signals can be supported as the separating equilibrium actions of the "strong type" of the informed player. I characterize the set of such sequences. I also characterize the sequences of signals in least cost separating equilibria (LCSE) of these games. In doing this, I introduce a state variable that can be interpreted as a measure of reputation. This gives the optimization problem characterizing the LCSE a recursive structure. I show that, in general, the equilibrium path sequences of signals have a simple structure. The shapes of the optimal sequences depend critically on the relative concavities of the payoff functions of different types, which measure the relative preferences towards payoff smoothing.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 66 (2009)
Issue (Month): 2 (July)
Pages: 841-854

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Handle: RePEc:eee:gamebe:v:66:y:2009:i:2:p:841-854
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  19. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
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