Signaling without common prior

Results on experimental equilibrium selection

M. Drouvelis, W. Müller, A. Possajennikov

Research output: Contribution to journalArticleScientificpeer-review

Abstract

The common prior assumption is pervasive in game-theoretic models with incomplete information. This paper investigates experimentally the importance of inducing a correct common prior in a two-person signaling game. Equilibrium selection arguments predict that different equilibria may be selected depending on whether the common prior is induced or not. Indeed, for a specific probability distribution of the senderʼs type, the long-run behavior without an induced common prior is shown to be different from the long-run behavior when a common prior is induced, while for other distributions long-run behavior is similar under both regimes. We also present a learning model that allows players to learn about the other playersʼ strategies and the prior distribution of the senderʼs type. We show that this learning model accurately accounts for all main features of the data.
Original languageEnglish
Pages (from-to)102-119
JournalGames and Economic Behavior
Volume74
Issue number1
DOIs
Publication statusPublished - 2012

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Equilibrium selection
Common priors
Learning model
Common prior assumption
Probability distribution
Signaling games
Incomplete information
Game-theoretic models

Cite this

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title = "Signaling without common prior: Results on experimental equilibrium selection",
abstract = "The common prior assumption is pervasive in game-theoretic models with incomplete information. This paper investigates experimentally the importance of inducing a correct common prior in a two-person signaling game. Equilibrium selection arguments predict that different equilibria may be selected depending on whether the common prior is induced or not. Indeed, for a specific probability distribution of the senderʼs type, the long-run behavior without an induced common prior is shown to be different from the long-run behavior when a common prior is induced, while for other distributions long-run behavior is similar under both regimes. We also present a learning model that allows players to learn about the other playersʼ strategies and the prior distribution of the senderʼs type. We show that this learning model accurately accounts for all main features of the data.",
author = "M. Drouvelis and W. M{\"u}ller and A. Possajennikov",
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Signaling without common prior : Results on experimental equilibrium selection. / Drouvelis, M.; Müller, W.; Possajennikov, A.

In: Games and Economic Behavior, Vol. 74, No. 1, 2012, p. 102-119.

Research output: Contribution to journalArticleScientificpeer-review

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