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Designing a Competitive Monotone Signaling Equilibrium

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  • Seungjin Han
  • Alex Sam
  • Youngki Shin

Abstract

A decision maker (DM) determines a set of reactions that receivers can choose before senders and receivers move in a generalized competitive signaling model with two-sided matching. The DM’s optimal design of the unique stronger monotone signaling equilibrium (unique D1 equilibrium) is equivalent to the choice problem of two threshold sender types, one for market entry and the other for pooling on the top. Our analysis sheds light on the impacts of a trade-off between matching efficiency and signaling costs, the relative heterogeneity of receiver types to sender types, and the productivity of the sender’s action on optimal equilibrium designing.

Suggested Citation

  • Seungjin Han & Alex Sam & Youngki Shin, 2021. "Designing a Competitive Monotone Signaling Equilibrium," Department of Economics Working Papers 2021-08, McMaster University.
    • Handle: RePEc:mcm:deptwp:2021-08
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    File URL: http://socialsciences.mcmaster.ca/econ/rsrch/papers/archive/2021-08.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    optimal equilibrium design; monotone signaling equilibrium; stronger monotone belief; Criterion D1;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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