A Characterization of Separating Equilibrium in Multidimensional Signaling Games

We study separating equilibria (SE) in pure signaling games in which both type and signaling spaces aremultidimensional, the sender payoff is quasi-linear and receiver utility is independent of the signal (pure signaling case). We show for a large class of cost functions that a sender’s strategy constitutes an SE if and only if it satisfies a certain set of conditions. In particular, we show that the sender’s strategy in an SE is given as a solution of a certain minimization problem. This is reminiscent of the derivation of the Hicksian demand function in traditional consumer theory. Our model is more general than Quinzii and Rochet [11], who characterize SE in the case of separable, linear cost functions. We reconstruct some of their results by using our characterization. JEL classification: C72, D82