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Best-Reply Matching in an Experience Good Model

Authors: Gisèle Umbhauer;

Best-Reply Matching in an Experience Good Model

Abstract

The paper studies a class of experience good models in a new way. We focus on signaling games close to Akerlof’s market for lemons, in which a seller sells a good to a buyer, who ignores the quality of the good during the transaction. In this context, we first establish some properties of the mixed Perfect Bayesian Equilibria. Then we turn to the concept of bestreply matching (BRM) developed by Droste, Kosfeld & Voorneveld (2002, 2003) for games in normal form. BRM equilibria respect a consistency which is different from the Nash equilibrium one: in a BRM equilibrium, the probability assigned by a player to a pure strategy is linked to the number of times the opponents play the strategies to which this pure strategy is a best reply. We extend this logic to signaling games in extensive form and apply the new obtained concept to our experience good models. This new concept leads to a very simple rule of behavior, which is consistent, different from the Perfect Bayesian Equilibrium behavior, different from Akerlof’s result, and can be socially efficient.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
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