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An Application of Global Games to Signalling Model


Wichardt, Philipp C (2006). An Application of Global Games to Signalling Model. Working paper series / Institute for Empirical Research in Economics No. 223, University of Zurich.

Abstract

In a first attempt to apply the global games methodology tonsignalling games, Ewerhart and Wichardt (2004) analyse a beer-quiche type signalling game with additional imperfect information about the preferences of the receiver. Their approach allows them to dismiss the unreasonable pool-ning on quiche equilibrium. This paper revisits their example and discusses how an extension of the set of strategies for the sender affects the analysis. Interestingly, for an extended beer-quiche game, a unique equilibrium is selected while two equilibria are consistent with the Intuitive Criterionn(Cho and Kreps, 1987). Apart from the technical analysis, potential economic applications of the results, e.g. in a context of limit pricing and entry deterrence, are indicated.

Abstract

In a first attempt to apply the global games methodology tonsignalling games, Ewerhart and Wichardt (2004) analyse a beer-quiche type signalling game with additional imperfect information about the preferences of the receiver. Their approach allows them to dismiss the unreasonable pool-ning on quiche equilibrium. This paper revisits their example and discusses how an extension of the set of strategies for the sender affects the analysis. Interestingly, for an extended beer-quiche game, a unique equilibrium is selected while two equilibria are consistent with the Intuitive Criterionn(Cho and Kreps, 1987). Apart from the technical analysis, potential economic applications of the results, e.g. in a context of limit pricing and entry deterrence, are indicated.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:July 2006
Deposited On:29 Nov 2011 22:47
Last Modified:05 Apr 2017 23:14
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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