TITLE:
Mixed Strategy Nash Equilibria in Signaling Games
AUTHORS:
Barry R. Cobb, Atin Basuchoudhary, Gregory Hartman
KEYWORDS:
Game Theory; Decision Analysis; Decision Tree; Nash Equilibrium; Signaling Game
JOURNAL NAME:
Theoretical Economics Letters,
Vol.3 No.1,
February
26,
2013
ABSTRACT: Signaling games are characterized by asymmetric information where the more informed player has a choice about what information to provide to its opponent. In this paper, decision trees are used to derive Nash equilibrium strategies for signaling games. We address the situation where neither player has any pure strategies at Nash equilibrium, i.e. a purely mixed strategy equilibrium. Additionally, we demonstrate that this approach can be used to determine whether certain strategies are part of a Nash equilibrium containing dominated strategies. Analyzing signaling games using a decision-theoretic approach allows the analyst to avoid testing individual strategies for equilibrium conditions and ensures a perfect Bayesian solution.