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The Value of Commitment with Imperfect Observability and Private Information

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  • Giovanni Maggi

Abstract

The idea that commitment is valuable plays a key role in many economic models. However, Bagwell (1995) has shown that commitment may have no value if there is (even a slight) noise in the observation of the leader's action, thus casting doubt on the notion that commitment has strategic value. Here I reconsider the commitment story in a model where the leader's action is imperfectly observed and the leader has private information, and I examine how it is affected by uncertainty about the leader's type and by the observation noise.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 30 (1999)
Issue (Month): 4 (Winter)
Pages: 555-574

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Handle: RePEc:rje:randje:v:30:y:1999:i:winter:p:555-574

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Cited by:
  1. Tanja Hörtnagl & Rudolf Kerschbamer, 2014. "How the Value of Information Shapes the Value of Commitment Or: Why the Value of Commitment Does Not Vanish," Working Papers, Faculty of Economics and Statistics, University of Innsbruck 2014-03, Faculty of Economics and Statistics, University of Innsbruck.
  2. A. Muthoo, 2002. "A Model of the Origins of Basic Property Rights," Economics Discussion Papers, University of Essex, Department of Economics 546, University of Essex, Department of Economics.
  3. Shelegia, Sandro, 2012. "Imperfect information in a quality-competitive hospital market. A comment on Gravelle and Sivey," MPRA Paper 42121, University Library of Munich, Germany.
  4. Corona, Carlos & Nan, Lin, 2013. "Preannouncing competitive decisions in oligopoly markets," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 56(1), pages 73-90.

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