ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School

Abstract: The two games usually employed to model markets with asymmetries of information are the signalling game and the screening game. In the signalling game, an equilibrium may not be efficient due to the arbitrariness in the off-the-equilibrium-path beliefs. In the screening game, a pure strategy Nash equilibrium may fail to exist because of " cream-skimming " deviations. Perhaps surprisingly, I show how in a game that combines signalling and screening, an equilibrium generically exists and is efficient.

Keywords: efficiency; existence; signalling; screening information economics

JEL-codes: D82; D86

13 pages, February 20, 2016

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