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Learning to Signal in Markets

  • 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://128.118.178.162

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  1. 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.
  2. Gale, Douglas, 1992. "A Walrasian Theory of Markets with Adverse Selection," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 229-55, April.
  3. Van Damme, E., 1991. "Refinements of Nash Equilibrium," Papers 9107, Tilburg - Center for Economic Research.
  4. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-61, May.
  5. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  6. 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.
  7. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
  8. G. Noldeke & L. Samuelson, 2010. "An Evolutionary Analysis of Backward and Forward Induction," Levine's Working Paper Archive 538, David K. Levine.
  9. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-59, March.
  10. repec:att:wimass:9218 is not listed on IDEAS
  11. Blume, A. & Kim, Y.G. & Sobel, J., 1992. "Evolutionary Stability in Games of Communication," Working Papers 92-17, University of Iowa, Department of Economics.
  12. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
  13. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  14. Ehud Kalai & Ehud Lehrer, 1991. "Private-Beliefs Equilibrium," Discussion Papers 926, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  16. Drew Fudenberg & David K. Levine, 1993. "Self-Confirming Equilibrium," Levine's Working Paper Archive 2147, David K. Levine.
  17. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  18. Georg Nöldeke & Larry Samuelson, 1992. "The Evolutionary Foundations of Backward and Forward Induction," Discussion Paper Serie B 216, University of Bonn, Germany.
  19. repec:dgr:kubcen:19917 is not listed on IDEAS
  20. Fudenberg, Drew & Levine, David K, 1993. "Steady State Learning and Nash Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 547-73, May.
  21. 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.
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