Best-Reply Matching in an Experience Good Model

31 Pages Posted: 1 May 2007

See all articles by Gisèle Umbhauer

Gisèle Umbhauer

University of Strasbourg - Bureau d’Economie Théorique et Appliquée

Date Written: April 24, 2007


The paper studies a class of experience good models in a new way. We focus on signaling games close to Akerlof's market for lemons, in which a seller sells a good to a buyer, who ignores the quality of the good during the transaction. In this context, we first establish some properties of the mixed Perfect Bayesian Equilibria. Then we turn to the concept of best-reply matching (BRM) developed by Droste, Kosfeld & Voorneveld (2002, 2003) for games in normal form. BRM equilibria respect a consistency which is different from the Nash equilibrium one: in a BRM equilibrium, the probability assigned by a player to a pure strategy is linked to the number of times the opponents play the strategies to which this pure strategy is a best reply. We extend this logic to signaling games in extensive form and apply the new obtained concept to our experience good models. This new concept leads to a very simple rule of behavior, which is consistent, different from the Perfect Bayesian Equilibrium behavior, different from Akerlof's result, and can be socially efficient.

Keywords: best-reply matching, experience good, signaling game, Perfect Bayesian Equilibrium

JEL Classification: C72, D82, L15

Suggested Citation

Umbhauer, Gisèle, Best-Reply Matching in an Experience Good Model (April 24, 2007). Available at SSRN: or

Gisèle Umbhauer (Contact Author)

University of Strasbourg - Bureau d’Economie Théorique et Appliquée ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67085

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