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Signaling future actions and the potential for sacrifice

Listed author(s):
  • Ben-Porath, Elchanan
  • Dekel, Eddie
Registered author(s):

    We consider extensions of games where some players have the option of signaling future actions by incurring costs. The main result is that in a class of games, if one player can incur costs, then forwards induction selects her most preferred outcome. Surprisingly, the player does not have to incur any costs to achieve this—the option alone suffices. However, when all players can incur costs, one player's attempt to signal a future action is vulnerable to a counter-signal by the opponent. This vulnerability to counter-signaling distinguishes signaling future actions from signaling types.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022053105800390
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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 57 (1992)
    Issue (Month): 1 ()
    Pages: 36-51

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    Handle: RePEc:eee:jetheo:v:57:y:1992:i:1:p:36-51
    DOI: 10.1016/S0022-0531(05)80039-0
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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    1. van Damme, Eric, 1989. "Stable equilibria and forward induction," Journal of Economic Theory, Elsevier, vol. 48(2), pages 476-496, August.
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    5. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    6. Osborne, Martin J., 1990. "Signaling, forward induction, and stability in finitely repeated games," Journal of Economic Theory, Elsevier, vol. 50(1), pages 22-36, February.
    7. Farrell, Joseph, 1988. "Communication, coordination and Nash equilibrium," Economics Letters, Elsevier, vol. 27(3), pages 209-214.
    8. Glazer, Jacob & Weiss, Andrew, 1990. "Pricing and coordination: Strategically stable equilibria," Games and Economic Behavior, Elsevier, vol. 2(2), pages 118-128, June.
    9. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    10. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-661, May.
    11. Crawford, Vincent P & Haller, Hans, 1990. "Learning How to Cooperate: Optimal Play in Repeated Coordination Games," Econometrica, Econometric Society, vol. 58(3), pages 571-595, May.
    12. Kohlberg, Elon & Mertens, Jean-Francois, 1986. "On the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 54(5), pages 1003-1037, September.
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