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Learning to signal in markets

  • Nöldeke, Georg
  • Larry Samuelson

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 University of Bonn, Germany in its series Discussion Paper Serie B with number 271.

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Length: pages
Date of creation: 1994
Date of revision:
Handle: RePEc:bon:bonsfb:271
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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  1. Van Damme, E., 1991. "Refinements of Nash Equilibrium," Papers 9107, Tilburg - Center for Economic Research.
  2. Blume, A. & Kim, Y.G. & Sobel, J., 1993. "Evolutionary Stability in Games of Communication," Working Papers 93-07, University of Iowa, Department of Economics.
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  11. Georg Nöldeke & Larry Samuelson, 1992. "The Evolutionary Foundations of Backward and Forward Induction," Discussion Paper Serie B 216, University of Bonn, Germany.
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  18. 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.
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