IDEAS home Printed from https://ideas.repec.org/p/esx/essedp/8887.html
   My bibliography  Save this paper

Commitment and Observability in an Economic Environment

Author

Listed:
  • Bhaskar, V

Abstract

Bagwell (1995) argues that commitment in undermined by the slightest imperfectness in observation. Guth, Ritzberger & Kirchsteiger (1998) question this assertion: for any finite leader-follower game, with arbitrary many players in each role and generic payoffs, they show that there always exists a subgame perfect equilibrium outcome that is accessible, i.e. it can be approximated by the outcome of a mixed equilibrium of the game with imperfect observation. We show that accessibility fails in a class of games played in economic environments, where the payoffs to commitment actions depend upon prices set by other agents, prices being chosen from a continuum. Accessibility requires either that commitment is not required or that the price setting agents have no monopoly power. Our result follows from a generalized indifference principle which mixed strategies must satisfy in such economic environments.

Suggested Citation

  • Bhaskar, V, 2005. "Commitment and Observability in an Economic Environment," Economics Discussion Papers 8887, University of Essex, Department of Economics.
    • Handle: RePEc:esx:essedp:8887
    as

    Download full text from publisher

    File URL: https://repository.essex.ac.uk/8887/
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bagwell, Kyle, 1995. "Commitment and observability in games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 271-280.
    2. Guth, Werner & Kirchsteiger, Georg & Ritzberger, Klaus, 1998. "Imperfectly Observable Commitments inn-Player Games," Games and Economic Behavior, Elsevier, vol. 23(1), pages 54-74, April.
    3. Giovanni Maggi, 1999. "The Value of Commitment with Imperfect Observability and Private Information," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 555-574, Winter.
    4. Jorg Oechssler & Karl Schlag, 1997. "An Evolutionary Analysis of Bagwell's Example," Game Theory and Information 9704001, University Library of Munich, Germany, revised 11 Apr 1997.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Morgan, John & Vardy, Felix, 2007. "The value of commitment in contests and tournaments when observation is costly," Games and Economic Behavior, Elsevier, vol. 60(2), pages 326-338, August.
    2. Bhaskar, V., 2009. "Games played in a contracting environment," Games and Economic Behavior, Elsevier, vol. 67(2), pages 389-398, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Morgan, John & Vardy, Felix, 2007. "The value of commitment in contests and tournaments when observation is costly," Games and Economic Behavior, Elsevier, vol. 60(2), pages 326-338, August.
    2. Lagerlof, Johan, 2003. "Policy-Motivated Candidates, Noisy Platforms, and Non-robustness," Public Choice, Springer, vol. 114(3-4), pages 319-347, March.
    3. 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 2014-03, Faculty of Economics and Statistics, Universität Innsbruck.
    4. Guth, Werner & Muller, Wieland & Spiegel, Yossi, 2006. "Noisy leadership: An experimental approach," Games and Economic Behavior, Elsevier, vol. 57(1), pages 37-62, October.
    5. Brishti Guha, 2017. "Costly Leader Games with a Probabilistically Non-Strategic Leader," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-14, June.
    6. Bhaskar, V., 2009. "Commitment and observability in a contracting environment," Games and Economic Behavior, Elsevier, vol. 66(2), pages 708-720, July.
    7. Giorgos Stamatopoulos, 2016. "Cournot and Stackelberg equilibrium under strategic delegation: an equivalence result," Theory and Decision, Springer, vol. 81(4), pages 553-570, November.
    8. Mostafa Beshkar & Jee-Hyeong Park, 2017. "Dispute Settlement with Second-Order Uncertainty: The Case of International Trade Disputes," CAEPR Working Papers 2017-010, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    9. Ricardo F. Reis & Phillip C. Stocken, 2007. "Strategic Consequences of Historical Cost and Fair Value Measurements," Contemporary Accounting Research, John Wiley & Sons, vol. 24(2), pages 557-584, June.
    10. Luigi Brighi & Marcello D'Amato, 2014. "Limit pricing and secret barriers to entry," Center for Economic Research (RECent) 106, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    11. Bhaskar, V. & van Damme, Eric, 2002. "Moral Hazard and Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 16-39, January.
    12. Mostafa Beshkar & Jee‐Hyeong Park, 2021. "Dispute Settlement With Second‐Order Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(4), pages 1433-1452, November.
    13. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2019. "Induced Price Leadership and (Counter-)Spying Rivals' Play under Incomplete Information," CESifo Working Paper Series 7476, CESifo.
    14. Chung-Hui Chou, 2023. "An analysis of managerial delegation in a market with vertically-integrated producer owning an essential input monopolistically," Review of Economic Design, Springer;Society for Economic Design, vol. 27(1), pages 247-265, February.
    15. Jacopo Bizzotto & Toomas Hinnosaar & Adrien Vigier, 2022. "The Limits of Commitment," Papers 2205.05546, arXiv.org, revised Nov 2022.
    16. repec:ebl:ecbull:v:3:y:2008:i:74:p:1-8 is not listed on IDEAS
    17. Jörg Oechssler & Karl H Schlag, 1997. "Loss of Commitment? An Evolutionary Analysis of Bagwell’s Example," Levine's Working Paper Archive 598, David K. Levine.
    18. Michael Kopel & Clemens Löffler, 2008. "Commitment, first-mover-, and second-mover advantage," Journal of Economics, Springer, vol. 94(2), pages 143-166, July.
    19. Huck, Steffen & Muller, Wieland, 2000. "Perfect versus Imperfect Observability--An Experimental Test of Bagwell's Result," Games and Economic Behavior, Elsevier, vol. 31(2), pages 174-190, May.
    20. Takahashi, Satoru & Tercieux, Olivier, 2020. "Robust equilibrium outcomes in sequential games under almost common certainty of payoffs," Journal of Economic Theory, Elsevier, vol. 188(C).
    21. Reuben Bearman, 2023. "Signaling Games with Costly Monitoring," Papers 2302.01116, arXiv.org.

    More about this item

    Keywords

    imperfect observation; mixed strategies.;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esx:essedp:8887. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Essex Economics Web Manager (email available below). General contact details of provider: https://edirc.repec.org/data/edessuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.