Strategic Signaling in Global Games: An Examination of a Global Game with Potentially Adversarial Signaling

Abstract

This paper explores a global game with signaling, i.e. a game in which players receive imperfect information about game fundamentals and in which one player may signal, in order to understand how signaling operates within the background of imperfect information.

In particular, we explore how the signaler may use signaling to induce a more favorable outcome. We construct a two-player global game which allows one player to send a costly signal in order to potentially deceive the other player by inducing the other player to act against his/her own interests. We characterize equilibria of this game for which a finite number of signals may be used in equilibrium, finding - in the spirit of Angeletos and Pavan (2013, [Ang13][§3]) - that the signaler will not use a costly signal for extremal types. We also lay out explicit definitions of sets which may used to construct equilibrium strategies and make several conclusions from these definitions. It remains to see whether these conclusions extend to cases in which infinitely many signals may be played in equilibrium.