Contractual Signaling in a Market Environment

Abstract We consider a game of signaling where the informed sender proposes a contract, which can only be accepted or rejected by the receiver. While most of the literature considers a bilaterally monopolistic setting, we embed the game in a market environment where a sender may switch to another receiver in case of rejection. We analyze how this structural extension can be employed to restrict the set of (stationary) equilibrium allocations. Journal of Economic Literature Classification Number: C78, D82.