Signaling games and stable equilibria. (English) Zbl 0626.90098

Cho, In-Koo; Kreps, David M.

Q. J. Econ. 102, 179-221 (1987).

Games in which one party conveys private information to a second through messages typically admit large numbers of sequential equilibria, as the second party may entertain a wealth of beliefs in response to out-of- equilibrium messages. By restricting those out-of-equilibrium beliefs, one can sometimes eliminate many unintuitive equilibria. We present a number of formal restrictions of this sort, investigate their behavior in specific examples, and relate these restrictions to Kohlberg and Mertens’ notion of stability.

MSC:

91A05

2-person games

Keywords:

private information; sequential equilibria; stability