Fixed-Equilibrium Rationalizability in Signaling Games
Posted: 19 Feb 2014
Date Written: April 13, 1990
This paper studies equilibrium refinements in signaling games through an examination of rationalizability in derived games obtained by replacing the equilibrium path with a sure outcome that yields the equilibrium payoff to all players. The informed player chooses between the sure payoff and sending an out-of-equilibrium signal from the original game. Whether or not the strategy of choosing the sure payoff is rationalizable is related to the iterated intuitive condition (divinity) when the original game is viewed as having imperfect (incomplete) information. Our results also demonstrate the significance of testing out-of-equilibrium signals as a set rather than individually.
Keywords: Contract theory, Incentives
JEL Classification: C70, D82
Suggested Citation: Suggested Citation