midGame Theory
What is separating equilibrium in signaling games?
Updated May 16, 2026
Short answer
A separating equilibrium is one where different types choose different signals.
Deep explanation
Each type of player selects a distinct signal, allowing the receiver to perfectly infer the sender's type. It requires incentive compatibility and cost structure that supports separation.
Real-world example
Education signaling high ability in labor markets.
Common mistakes
- Assuming separation always exists.
Follow-up questions
- What makes separation possible?
- Is separating equilibrium always stable?