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Signaling, Renements
Gibbons 4.4
Fall 2013
1
L
2,2
M
2
A
3,1
B
0,0
A
1,0
B
0,1
Consider
R , B , p 21
Another Example
D
1
L
1,3
2,2
M
2
3,1
In equilibrium:
B
0,0
A
1,0
B
0,1
Denition
Requirement 5
Requirement 5
If possible, each player's beliefs o the equilibrium path should
place zero probability on nodes that are reached only if another
player plays a strategy that is strictly dominated beginning at some
information set.
Intuition: Players know that other players are rational and will
never play a strictly dominated strategy
2,2
M
2
1,1
0,0
L and M
1,1
B
0,1
Both
u
[p]
2, 0
Nature
1
2
u
L
1, 1
t2
[q]
d
1
2
R
1, 0
t1
1, 0
0, 1
R
u
2, 1
R
d
0, 0
(L, L).
Signaling Requirement 5
Dominated Messages
The message
message
for
than
m.
m0
j
is better
Signaling Requirement 5
If the information set following
t , then
(t |m ) = 0
i
if
u
[p]
3, 0
[q]
d
Nature
0.9
u
L
2, 0
0.1
R
0, 1
t1
t2
0, 1
2, 0
R
u
1, 1
R
d
3, 0
Pooling PBE:
t1 choose R
instead of
L?
Requirement 6
Equilibrium Domination
Given a PBE in a signaling game, the message
dominated for type
is equilibrium
is
(t |m ) = 0
i