Signaling Requirement Assignment Help

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Signaling  Requirement  1:  After  observing  any  message  mj  from  M,  the receiver must have a belief about which types could have sent mJ. Denote this belief by  the probability distribution μ(ti,1 mj), where u(ti | mj) ≥ 0 for each ti in 1203_Signaling Requirement.png

Given the  sender's message and  the  receiver's  belief,  it  is  straightforward  to characterise  the receiver's optimal  action. Applying requirement  2  to  the receiver therefore yields:

Signaling  Requirement  2R:  For  each mj  in M,  the  receiver's action a*(mj) must maximise the receiver's expected utility, given the belief  μ(ti,1 mj)  about which  types  could  have  sent mj.  That  is,  a*(mj) solves  2216_Signaling Requirement1.png

Requirement  2  also applies to the sender,  but  the  sender has  complete information (and hence a trivial belief) and  also moves only at the beginning of the game, so requirement 2  is simply that the  sender's  strategy be  optimal given the receiver's strategy:

Signaling Requirement 2s: For each ti  in T, the sender's message m*(ti)  must maximise  the  sender's utility,  given the  receiver's  strategy  a (mj).  that  is,2219_Signaling Requirement2.png

Finally, given the  sender's  strategy m*(t,),  let Tj denote the set of types  that send the message m,.  That is, t, is a member of the set TJ if m*(ti)  = mj.  If Tj is nonempty then the information set corresponding to the message m,  is on  the equilibrium path;  otherwise,  m,  is  not  sent  by  any  type  and  so  the corresponding information set is off the equilibrium path. For messages on the equilibrium path, applying requirement 3 to the receiver's beliefs yields:

Signaling  Requirement 3: For  each m,  in M,  if there exist t, in  T such  that m (t,) = m,,  then  the  receiver's  belief at  the information set corresponding  to m,  must follow from Bayes'  rule and the sender's strategy:  

2118_Signaling Requirement3.png

Definition: A pure  strategy perfect Bayesian Nash  equilibrium  in  a signaling game is a pair  of strategies m*(ti) and a*(mj)  and a belief μ(ti,1 mj)satisfying signaling requirement  1, 2S, 2R and 3. If the sender's  strategy  is  pooling  or  separating we  call  the  equilibrium is pooling or separating respectively.

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