The Intuitive and Divinity Criterion: Interpretation and Step-by-Step Examples

Felix Munoz-Garcia; Ana Espinola-Arredondo

doi:10.2202/1935-5041.1024

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The Intuitive and Divinity Criterion: Interpretation and Step-by-Step Examples

Journal article

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The Intuitive and Divinity Criterion: Interpretation and Step-by-Step Examples

Felix Munoz-Garcia and Ana Espinola-Arredondo

Journal of industrial organization education, Vol.5(1), pp.1-20

12/2010

DOI: https://doi.org/10.2202/1935-5041.1024

Handle:

https://hdl.handle.net/2376/120025

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Abstract

Asymmetric and Private Information, Mechanism Design (D82)

Economic Education and Teaching of Economics: Graduate (A23)

Equilibria

Noncooperative Games (C72)

Signaling

Economics

Games

The paper presents an intuitive explanation of the Cho and Kreps' (1987) Intuitive Criterion, and the Banks and Sobel's (1987) Divinity Criterion (also referred as D1-Criterion). We provide multiple examples in which students can understand, step-by-step, the two main phases involved in these refinement criteria. Furthermore, we present economic settings in which the Cho and Kreps' (1987) Intuitive Criterion does not restrict the set of equilibria, while the Banks and Sobel's (1987) Divinity Criterion help refine the set of admissible separating equilibria in signaling games.

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Title: The Intuitive and Divinity Criterion
Creators: Felix Munoz-Garcia
Ana Espinola-Arredondo
Publication Details: Journal of industrial organization education, Vol.5(1), pp.1-20
Academic Unit: Economic Sciences, School of
Identifiers: 99900971340001842
Language: English
Resource Type: Journal article