Dynamic Signaling in Wald Options
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Tel: +352 46 66 44 6283
Joint work with Doruk Cetemen
A sender engages in costly signaling to influence a decision maker, who observes a biased noisy signal and decides when to irreversibly take an action to match the binary state. We characterize Markov equilibria in terms of a two-dimensional boundary value problem for fixed discount rates and analyze equilibrium behavior as players become arbitrary patient. The leading example is a dynamic limit pricing game between an incumbent and a potential entrant who uses price to infer the industry conditions. A sufficiently patient incumbent always produces at capacity, and consumers can be hurt because the potential entrant strategically delays its entry.
About Chiara Margaria:
Chiara Margaria is a microeconomic theorist studying the strategic implication of signaling and learning in dynamic settings. In her most recent recent, she applies dynamic game tools to address Industrial Organization questions. She obtained her PhD from Yale in 2017 and is she has since been an Assistant Professor at the Economics Department at Boston University.
Supported by the Luxembourg National Research Fund (FNR) 17931929