An Application of Global Games to Signalling Models

In a ¯rst attempt to apply the global games methodology to signalling games, Ewerhart and Wichardt (2004) analyse a beer-quiche type signalling game with additional imperfect information about the preferences of the receiver. Their approach allows them to dismiss the unreasonable pool- ing on quiche equilibrium. This paper revisits their example and discusses how an extension of the set of strategies for the sender a®ects the analy- sis. Interestingly, for an extended beer-quiche game, a unique equilibrium is selected while two equilibria are consistent with the Intuitive Criterion (Cho and Kreps, 1987). Apart from the technical analysis, potential eco- nomic applications of the results, e.g. in a context of limit pricing and entry deterrence, are indicated.