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Rationalization In Signaling Games: Theory And Applications

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  • PIERPAOLO BATTIGALLI

    () (Bocconi University and IGIER, Via Salasco, 5, 20136, Milano, Italy)

Abstract

Focusing on signaling games, I illustrate the relevance of the rationalizability approach for the analysis multistage games with incomplete information. I define a class of iterative solution procedures, featuring a notion of "forward induction": the Receiver tries to explain the Sender's message in a way which is consistent with the Sender's strategic sophistication and certain given restrictions on beliefs. The approach is applied to some numerical examples and economic models. In a standard model with verifiable messages a full disclosure result is obtained. In a model of job market signaling the best separating equilibrium emerges as the unique rationalizable outcome only when the high and low types are sufficiently different. Otherwise, rationalizability only puts bounds on the education choices of different types.

Suggested Citation

  • Pierpaolo Battigalli, 2006. "Rationalization In Signaling Games: Theory And Applications," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 67-93.
  • Handle: RePEc:wsi:igtrxx:v:08:y:2006:i:01:n:s0219198906000795
    DOI: 10.1142/S0219198906000795
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    Cited by:

    1. repec:use:tkiwps:2727 is not listed on IDEAS
    2. Ying Xue Li & Burkhard Schipper, 2018. "Strategic Reasoning in Persuasion Games: An Experiment," Working Papers 181, University of California, Davis, Department of Economics.

    More about this item

    Keywords

    Incomplete information; signaling; rationalization; Subject Classification: C72; Subject Classification: D82;

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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