Signaling, Screening, and Core Stability
41 Pages Posted: 11 Mar 2022 Last revised: 25 Aug 2022
Date Written: January 1, 2022
Abstract
This paper provides a noncooperative approach to core stability in an economy with incomplete information. We study the perfect Bayesian equilibria of an extensive form mechanism that extends the one used by Serrano and Vohra (1997) to implement the core of a complete-information economy. This leads to a version of the core that we refer to as the sequential core, which allows for information flows through proposals that can be viewed as signaling devices and/or screening contracts. Equilibrium refinements are then used to provide justifications for the coarse core and the fine core.
Keywords: core, incomplete information, perfect Bayesian equilibrium, signaling, screening, Nash program.
JEL Classification: C71, C72, D51
Suggested Citation: Suggested Citation