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How the Value of Information Shapes the Value of Commitment Or: Why the Value of Commitment Does Not Vanish

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  • Tanja Hörtnagl

    ()

  • Rudolf Kerschbamer

    ()

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    Abstract

    This paper challenges recent results on the fragility of the value of commitment. It introduces a specific notion of the ’value of information’ for a later-moving player about the action choice of a previously-moving player, gives conditions under which this value is positive and shows that a positive value of information for the latermoving player is sufficient for a positive value of commitment for the previouslymoving player. It then argues that the value of information for a later-moving player is unlikely to vanish in real-world applications, implying that the value of commitment for the previously-moving player does not vanish either.

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    File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2014-03.pdf
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    Bibliographic Info

    Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2014-03.

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    Length: 29
    Date of creation: Feb 2014
    Date of revision:
    Handle: RePEc:inn:wpaper:2014-03

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    Related research

    Keywords: Value of Information; Value of Commitment; Sequential Move Game; Imperfect Observability; Stackelberg Duopoly; First-Mover Advantage;

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    References

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    16. Kamien, Morton I. & Tauman, Yair & Zamir, Shmuel, 1990. "On the value of information in a strategic conflict," Games and Economic Behavior, Elsevier, Elsevier, vol. 2(2), pages 129-153, June.
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    18. Lehrer, Ehud & Rosenberg, Dinah, 2010. "A note on the evaluation of information in zero-sum repeated games," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 393-399, July.
    19. Showalter, Dean M, 1995. "Oligopoly and Financial Structure: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 647-53, June.
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