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The paper providesan analysis of a sender-receiver sequential signaling game. The private informationof the sender is transmitted with noise by a Machine, i.e. does not always correctly reflect the state of nature. Hence,a truthful revelation by the sender of his information does not necessarilyimply that the signal he sends is correct. Also, the receiver can take acorrect action even if the sender transmits an incorrect signal. The payoffs ofthe two players depend on their combined actions. Perfect Bayesian Equilibriawhich can result from different degrees of noise is analysed. The Bayesianupdating of probabilities is explained. The fixed point theorem which makes theconnection with the idea of rational expectations in economics is calculated.Given a number of equilibria, we comment on the most credible one on the basisof the implied payoffs for both players. The equilibrium signals are an exampleof the formation of a language convention discussed by D. Lewis.


Signals and Non-Cooperative Signaling Games, Noise, States of Nature, A Machine, Imperfect Information Sets, Actions, Language Convention, Nash Equilibrium, Beliefs Updating, Perfect Bayesian Equilibrium, Fixed Point, Self-Fulfilling Prophesies, Rational Expectations Equilibrium

Cite this paper

Dassiou, X. and Glycopantis, D. 2014 A Tree Formulation for Signaling Games with Noise. Natural Science, 6, 1128-1139. doi: 10.4236-ns.2014.613101.

Author: Xeni Dassiou, Dionysius Glycopantis

Source: http://www.scirp.org/


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