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Learning to Signal in Markets

Listed author(s):
  • Georg Noldeke

    (Princeton University)

  • Larry Samuelson

    (University of Wisconsin)

We formulate a dynamic learning-and-adjustment model of a market in which sellers choose signals that potentitally 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 equilibrim 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 equlibrium 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 equlibria and, possibly, nonequilibrrium outcomes.

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Paper provided by EconWPA in its series Game Theory and Information with number 9410001.

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Date of creation: 20 Oct 1994
Date of revision: 21 Oct 1994
Handle: RePEc:wpa:wuwpga:9410001
Contact details of provider: Web page: http://econwpa.repec.org

References listed on IDEAS
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  1. Kalai, Ehud & Lehrer, Ehud, 1991. "Private-Beliefs Equilibrium," Working Papers 91-19, C.V. Starr Center for Applied Economics, New York University.
  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. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  4. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
  5. John G. Riley, 1976. "Informational Equilibrium," UCLA Economics Working Papers 071, UCLA Department of Economics.
  6. 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.
  7. van Damme, E.E.C., 1991. "Refinements of Nash equilibrium," Discussion Paper 1991-7, Tilburg University, Center for Economic Research.
  8. 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.
  9. Banks, Jeffrey S. & Sobel, Joel., 1985. "Equilibrium Selection in Signaling Games," Working Papers 565, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. 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.
  11. Fudenberg, Drew & Levine, David K, 1993. "Steady State Learning and Nash Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 547-573, May.
  12. 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.
  13. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
  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. Douglas Gale, 1992. "A Walrasian Theory of Markets with Adverse Selection," Review of Economic Studies, Oxford University Press, vol. 59(2), pages 229-255.
  16. Noldeke, G. & Samuelson, L., 1992. "The Evolutionary Foundations of Backward and Forward Induction," Working papers 9218, Wisconsin Madison - Social Systems.
  17. Fudenberg, D. & Levine, D.K., 1991. "Self-Confirming Equilibrium ," Working papers 581, Massachusetts Institute of Technology (MIT), Department of Economics.
  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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