Econometrica: May 2022, Volume 90, Issue 3

Signaling under Double-Crossing Preferences

https://doi.org/10.3982/ECTA19210
p. 1225-1260

Chia‐Hui Chen, Junichiro Ishida, Wing Suen

This paper provides a general analysis of signaling under double‐crossing preferences with a continuum of types. There are natural economic environments where the indifference curves of two types cross twice, such that the celebrated single‐crossing property fails to hold. Equilibrium exhibits a threshold type below which types choose actions that are fully revealing and above which they pool in a pairwise fashion, with a gap separating the actions chosen by these two sets of types. The resulting signaling action is quasi‐concave in type. We also provide an algorithm to establish equilibrium existence by construction.



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