scholarly journals Exploring the Gap between Perfect Bayesian Equilibrium and Sequential Equilibrium

Games ◽  
2016 ◽  
Vol 7 (4) ◽  
pp. 35 ◽  
Author(s):  
Giacomo Bonanno
Keyword(s):  
Sequential Equilibrium ◽  
Perfect Bayesian Equilibrium ◽  
Bayesian Equilibrium

scholarly journals The Revelation Principle in Multistage Games

2020 ◽  
Author(s):  
Takuo Sugaya ◽  
Alexander Wolitzky
Keyword(s):  
Single Agent ◽  
Solution Concept ◽  
Sequential Equilibrium ◽  
Perfect Bayesian Equilibrium ◽  
Learning Games ◽  
Incentive Compatible ◽  
Multistage Games ◽  
Direct Mechanism ◽  
Revelation Principle ◽  
Bayesian Equilibrium

Abstract The communication revelation principle (RP) of mechanism design states that any outcome that can be implemented using any communication system can also be implemented by an incentive-compatible direct mechanism. In multistage games, we show that in general the communication RP fails for the solution concept of sequential equilibrium (SE). However, it holds in important classes of games, including single-agent games, games with pure adverse selection, games with pure moral hazard, and a class of social learning games. For general multistage games, we establish that an outcome is implementable in SE if and only if it is implementable in a canonical Nash equilibrium in which players never take codominated actions. We also prove that the communication RP holds for the more permissive solution concept of conditional probability perfect Bayesian equilibrium.

Comparing Models of Strategic Choice: The Role of Uncertainty and Signaling

2006 ◽  
Vol 14 (1) ◽  
pp. 101-120 ◽  
Author(s):  
Jonathan Wand
Keyword(s):  
Statistical Models ◽  
Structural Models ◽  
Strategic Choice ◽  
Perfect Bayesian Equilibrium ◽  
Quantal Response ◽  
Equilibrium Solutions ◽  
Equilibrium Models ◽  
Extensive Form ◽  
Bayesian Equilibrium

Testing the fit of competing equilibrium solutions to extensive form games crucially depends on assumptions about the distribution of player types. To illustrate the importance of these assumptions for differentiating standard statistical models of strategic choice, I draw on a game previously analyzed by Lewis and Schultz (2003). The differences that they highlight between a pair of perfect Bayesian equilibrium and quantal response equilibrium models are not produced by signaling and updating dynamics as claimed, but are instead produced by different assumptions about the distribution of player types. The method of analysis developed and the issues raised are applicable to a broad range of structural models of conflict and bargaining.

scholarly journals Outsourcing under incomplete information

2017 ◽  
Vol 10 (1) ◽  
pp. 3-15 ◽  
Author(s):  
Tarun Kabiraj ◽  
Uday Bhanu Sinha
Keyword(s):  
Asymmetric Information ◽  
Incomplete Information ◽  
Private Information ◽  
Low Cost ◽  
Complete Information ◽  
Fixed Cost ◽  
Perfect Bayesian Equilibrium ◽  
Content Type ◽  
Bayesian Equilibrium ◽  
Plant Level

Purpose The purpose of this paper is to show that outsourcing can occur as outcome of a separating or pooling perfect Bayesian equilibrium although it is not profitable under complete information. Therefore, asymmetric information can itself be a reason for outsourcing. Design/methodology/approach The present paper constructs a model of two firms interacting in the product market under asymmetric information where one firm has private information about its technological capability, and it has the option to produce inputs in-house or buy inputs from an input market. However, using outsourced inputs involves a fixed cost at the plant level. The model solves for perfect Bayesian equilibrium. Findings There are situations when under complete information, outsourcing of the input will not occur, but, under incomplete information, either only the low-cost type or both high and low-cost types will go for outsourcing, and there always exist reasonable beliefs supporting these equilibria. In particular, when the fixed cost is neither too small not too large, a separating equilibrium occurs in which the low-cost type outsources inputs from the input market but the high-cost type produces in-house; hence, outsourcing signals the firm’s type. Outsourcing by only the high-cost type firm will never occur in equilibrium. Originality/value That incomplete or asymmetric information can itself be a reason for strategic outsourcing is never identified in the literature. The present paper is an attempt to fill this gap and raise the issue of outsourcing in an incomplete information environment.

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