Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/173412 
Year of Publication: 
2017
Series/Report no.: 
Working Paper No. 252
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
We study the monotonicity of sender's equilibrium strategy with respect to her type in signalling games. We use counterexamples to show that when the sender's payoff is non-separable, the Spence-Mirrlees condition cannot rule out equilibria in which the sender uses non-monotone strategies. These equilibria can survive standard refinements as incentives are strict and the sender plays every action with positive probability. We provide sufficient conditions under which the sender's strategy is monotone in every Nash equilibrium. Our conditions require the sender's payoff to have strictly increasing differences between the state and the action profile and monotone with respect to each player's action. We also identify and fully characterize a novel property on the sender's payoff that we call increasing absolute differences over distributions, under which every pair of distributions over the receiver's actions can be ranked endogenously. Our sufficient conditions fit into a number of applications, including advertising, warranty provision, education and job assignment, etc.
Subjects: 
Signalling game
monotone equilibrium
Spence-Mirrlees condition
monotonesupermodular payoff
quasi-concavity preserving
increasing absolute differences over distributions
JEL: 
C72
D82
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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