Econometrica Vol. 55 No. 3 1987
Equilibrium Selection in Signaling Games
Abstract
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.
- DOI
- 10.2307/1913604
- Volume
- 55
- Issue
- 3
- Pages
- 647
- Sources
- bibtex:phds-export.bib openalex crossref