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Signaling Games and Stable Equilibria

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  • In-Koo Cho
  • David M. Kreps

Abstract

Games in which one party conveys private information to a second through messages typically admit large numbers of sequential equilibria, as the second party may entertain a wealth of beliefs in response to out-of-equilibrium messages. By restricting those out-of-equilibrium beliefs, one can sometimes eliminate many unintuitive equilibria. We present a number of formal restrictions of this sort, investigate their behavior in specific examples, and relate these restrictions to Kohlberg and Mertens' notion of stability.

Suggested Citation

  • 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.
  • Handle: RePEc:oup:qjecon:v:102:y:1987:i:2:p:179-221.
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    6. Joseph Farrell, 1985. "Credible Neologisms in Games of Communication," Working papers 386, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
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