Signaling future actions and the potential for sacrifice

Elchanan Ben-Porath, Eddie Dekel

Research output: Contribution to journalArticlepeer-review

Abstract

We consider extensions of games where some players have the option of signaling future actions by incurring costs. The main result is that in a class of games, if one player can incur costs, then forwards induction selects her most preferred outcome. Surprisingly, the player does not have to incur any costs to achieve this-the option alone suffices. However, when all players can incur costs, one player's attempt to signal a future action is vulnerable to a counter-signal by the opponent. This vulnerability to counter-signaling distinguishes signaling future actions from signaling types.

Original languageEnglish
Pages (from-to)36-51
Number of pages16
JournalJournal of Economic Theory
Volume57
Issue number1
DOIs
StatePublished - Jun 1992
Externally publishedYes

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