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Repeated signaling games

  • Kaya, Ayça
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    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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    File URL: http://www.sciencedirect.com/science/article/B6WFW-4TMBVPX-1/2/e3dc1bd05c42e5ada44234bc423495f9
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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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    1. D. Fudenberg & David K. Levine, 1989. "Reputation and Equilibrium Selection in Games with a Patient Player," Levine's Working Paper Archive 508, David K. Levine.
    2. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
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    4. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
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    8. Cho, In-Koo, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 575-95, October.
    9. Esther Gal-Or, 1989. "Warranties as a Signal of Quality," Canadian Journal of Economics, Canadian Economics Association, vol. 22(1), pages 50-61, February.
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    11. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-59, March.
    12. Kremer, Ilan & Skrzypacz, Andrzej, 2007. "Dynamic signaling and market breakdown," Journal of Economic Theory, Elsevier, vol. 133(1), pages 58-82, March.
    13. John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
    14. Noldeke, Georg & van Damme, Eric, 1990. "Signalling in a Dynamic Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 1-23, January.
    15. 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.
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    17. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
    18. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
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