This paper studies the sequential equilibria of signaling games. It introduces a new solution concept, divine equilibrium, that refines the set of sequential equilibria by requiring that off-the-equilibrium-path beliefs satisfy an additional restriction. This restriction rules out implausible sequential equilibria in many examples. We show that divine equilibria exist by demonstrating that a sequential equilibrium that fails to be divine cannot be in a stable component. However, the stable component of signaling games is typically smaller than the set of divine equilibria. We demonstrate this fact through examples. We also present a characterization of the stable equilibria in generic signaling games.

This paper offers an interpretive comparison of the Arrow-Pratt and Ross characterizations of comparative risk aversion for expected utility maximizers. The tools used in this comparison are then applied to obtain a strengthening of the Ross cha racterization. This strengthened result is in turn extended to the ca se of general, smooth, nonexpected utility preferences over probabili ty distributions. Copyright 1987 by The Econometric Society.