Faculty of Economics and Business Administration Publications Database

Contractual Signaling in a Market Environment

Volume: 40
Number: 1
Pages: 77 - 98
Month: July
ISSN-Print: 0899-8256
Link External Source: Online Version
Year: 2002
Keywords: Signaling; Adverse selection
Abstract: We consider a game of signaling where the informed sender proposes a contract, which can only be accepted or rejected by the receiver. While most of the literature considers a bilaterally monopolistic setting, we embed the game in a market environment where a sender may switch to another receiver in case of rejection. We analyze how this structural extension can be employed to restrict the set of (stationary) equilibrium allocations.