Separating equilibrium in quasi-linear signaling games
Research output: Working paper › Professional
We show that, when the set of the sender's type is finite, the collection of separating signaling functions forms a lower bounded lattice. We describe an algorithm to compute separating equilibrium strategies. When the set of the sender's type is a real interval, shortest path lengths are antisymmetric and a node potential is unique up to a constant. A strategy of the sender in a separating equilibrium is characterized by some differential equation with a unique solution.
Our results can be readily applied to a broad range of economic situations, such as the standard job market signaling model of Spence (a model not captured by earlier papers) and principal-agent models with production.
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