Preopening and Equilibrium Selection
Tinbergen Institute Discussion Paper 10-023/2
53 Pages
Posted: 23 Feb 2010
EMLYON Business School
HEC Paris - Finance Department
Date Written: February 16, 2010
Abstract
We introduce a form of pre-play communication that we call "preopening". During the preopening, players announce their tentative actions to be played in the underlying game. Announcements are made using a posting system which is subject to stochastic failures. Posted actions are publicly observable and players payoffs only depend on the opening outcome, i.e. the action profile that is posted at the end of the preopening phase. We show that when the posting failures hit players idiosyncratically all equilibria of the preopening game lead to the same opening outcome that corresponds to the most "sensible" pure Nash equilibrium of the underlying game. By contrast preopening does not operate an equilibrium selection when posting failure hits players simultaneously.
Keywords: Preopening, equilibrium selection, bargaining, cheap talk
JEL Classification: C72, C73, C78, G1
Suggested Citation:
Suggested Citation
Calcagno, Riccardo and Lovo, Stefano, Preopening and Equilibrium Selection (February 16, 2010). Tinbergen Institute Discussion Paper 10-023/2. Available at SSRN: https://ssrn.com/abstract=1557137 or http://dx.doi.org/10.2139/ssrn.1557137
