It seems to me like the first two stages are simple enough that Jessica’s treatment is an adequate formalization, insofar as the “market for lemons” model is well-understood. Can you say a bit more about how you’d expect additional formalization to help here?
In the original “market for lemons” game there was no signaling. Instead the possibility of “lemons” in the market just drives out “peaches” until the whole market collapses.
As I mentioned in my reply to Jessica, the actual model for stage 2 she had in mind seems more complex than any formal model in the literature that I can easily find. I was unsure from her short verbal description in the original comment what model she had in mind (in particular I wasn’t sure how to interpret “convincing lies”), and am still unsure whether the math would actually work out the way she thinks (although I grant that it seems intuitively plausible). I was also unsure whether she is assuming standard unbounded rationality or something else.
It’s in the transition from stage 2 to 3 and 4 that some modeling specific to this framework seems needed, to me.
I was confused/uncertain about stage 2 already, but sure I’d be interested in thoughts about how to model the higher stages too.
In the original “market for lemons” game there was no signaling. Instead the possibility of “lemons” in the market just drives out “peaches” until the whole market collapses.
As I mentioned in my reply to Jessica, the actual model for stage 2 she had in mind seems more complex than any formal model in the literature that I can easily find. I was unsure from her short verbal description in the original comment what model she had in mind (in particular I wasn’t sure how to interpret “convincing lies”), and am still unsure whether the math would actually work out the way she thinks (although I grant that it seems intuitively plausible). I was also unsure whether she is assuming standard unbounded rationality or something else.
I was confused/uncertain about stage 2 already, but sure I’d be interested in thoughts about how to model the higher stages too.