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

Author

Listed:
  • Tanja Hörtnagl
  • Rudolf Kerschbamer

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.

Suggested Citation

  • 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.
    • Handle: RePEc:inn:wpaper:2014-03
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    References listed on IDEAS

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    More about this item

    Keywords

    Value of Information; Value of Commitment; Sequential Move Game; Imperfect Observability; Stackelberg Duopoly; First-Mover Advantage;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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