denote the payoff to a type-γ informed player in the equilibrium under analysis.
The Intuitive Criterion can now be formally given:
Denition (Intuitive Criterion). Consider an equilibrium. For each out-of-
equilibrium action of the informed player, a, let
If there is a type
γ
′
∈
Ŵ(a)
\
Ŵ
0
such that
then the equilibrium fails the Intuitive Criterion.
The set
Ŵ
0
are types who do better in the equilibrium in question than they could rea-
sonably hope to do by deviating to a. For example, in the pooling PBE of Figure 6.5, if
a is warranty and high price, then
Ŵ
0
={
γ
L
}
(i.e., the set contains only the low-quality
type). T
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