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Learning to Signal in Market

Listed author(s):
  • Noldeka, G.
  • Samuelson, L.

We formulate a dynamic learning-and-adjustment model of a market in which sellers choose signals that potentially reveal their types. If the dynamic process selects a unique limiting outcome, then that outcome must be an undefeated equilibrium; though to be undefeated does not suffice to be the sole limiting outcome. If a Riley outcome exists that provides "high" type sellers with a higher utility than any other equilibrium outcome, then that outcome is the unique limiting outcome of our model. In the absence of a Riley outcome, or if high type workers obtain higher utility in a pooling equilibrium than in the Riley outcome, a unique limit outcome will only emerge under very stringent conditions. If these conditions fail, the market will cycle between various equilibria and, possibly, nonequilibrium outcomes

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Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 9409.

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Length: 45 pages
Date of creation: 1994
Handle: RePEc:att:wimass:9409
Contact details of provider: Postal:
UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

References listed on IDEAS
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  1. Blume Andreas & Kim Yong-Gwan & Sobel Joel, 1993. "Evolutionary Stability in Games of Communication," Games and Economic Behavior, Elsevier, vol. 5(4), pages 547-575, October.
  2. 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.
  3. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
  4. Douglas Gale, 1992. "A Walrasian Theory of Markets with Adverse Selection," Review of Economic Studies, Oxford University Press, vol. 59(2), pages 229-255.
  5. Van Damme, E., 1991. "Refinements of Nash Equilibrium," Papers 9107, Tilburg - Center for Economic Research.
  6. Fudenberg, Drew & Levine, David K, 1993. "Steady State Learning and Nash Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 547-573, May.
  7. 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.
  8. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
  9. Noldeke Georg & Samuelson Larry, 1993. "An Evolutionary Analysis of Backward and Forward Induction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 425-454, July.
  10. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-359, March.
  11. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-661, May.
  12. Fudenberg, Drew & Levine, David K, 1993. "Self-Confirming Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 523-545, May.
  13. Kalai, Ehud & Lehrer, Ehud, 1991. "Private-Beliefs Equilibrium," Working Papers 91-19, C.V. Starr Center for Applied Economics, New York University.
  14. Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, vol. 50(2), pages 381-413, April.
  15. Georg Nöldeke & Larry Samuelson, 1992. "The Evolutionary Foundations of Backward and Forward Induction," Discussion Paper Serie B 216, University of Bonn, Germany.
  16. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  17. Joseph Stiglitz & Andrew Weiss, 1990. "Sorting Out the Differences Between Signaling and Screening Models," NBER Technical Working Papers 0093, National Bureau of Economic Research, Inc.
  18. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
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