Signaling future actions and the potential for sacrifice

Elchanan Ben-Porath; Eddie Dekel

doi:10.1016/S0022-0531(05)80039-0

Signaling future actions and the potential for sacrifice

Elchanan Ben-Porath^*, Eddie Dekel

^*Corresponding author for this work

Economics

Research output: Contribution to journal › Article › peer-review

90 Scopus citations

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 language	English (US)
Pages (from-to)	36-51
Number of pages	16
Journal	Journal of Economic Theory
Volume	57
Issue number	1
DOIs	https://doi.org/10.1016/S0022-0531(05)80039-0
State	Published - Jun 1992

Funding

* This is a revision of "Coordination and the Potential for Self Sacrifice," first draft dated November 1987. We thank an associate editor, a referee, and Matthew Rabin for detailed and helpful comments. Financial support from the Miller Institute, IBER, the Sloan Foundation and NSF Grant SES-8808133 are gratefully acknowledged. This work was begun while the first author was at the Graduate School of Business, Stanford University.

ASJC Scopus subject areas

Economics and Econometrics

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10.1016/S0022-0531(05)80039-0

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AB - 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.

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Signaling future actions and the potential for sacrifice

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