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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
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  1. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
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  10. 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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  15. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-61, May.
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