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Strategic Commitment Versus Flexibility in a Duopoloy with Entry and Exit

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  • Jeffery Ely
  • Johannes Horner
  • Wojciech Olszewski
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    Abstract

    We introduce a class of strategies which generalizes examples constructed in two-player games under imperfect private monitoring. A sequential equilibrium is belief-free if, after every private history, each player.s continuation strategy is optimal independently of his belief about his opponents. private histories. We provide a simple and sharp characterization of equililibrium payos using those strategies. While such strategies have desirable robustness properties, they are not rich enough to generate a folk theorem in most games besides the prisoner's dilemma, even when noise vanishes.

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    Bibliographic Info

    Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1381.

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    Date of creation: 28 Mar 2004
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    Handle: RePEc:nwu:cmsems:1381

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    1. George J. Mailath & Stephen Morris, 1999. "Repeated Games with Almost-Public Monitoring," CARESS Working Papres almost-pub, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences, revised 01 Sep 2000.
    2. D. Fudenberg and E. Maskin., 1987. "Nash and Perfect Equilibria of Discounted Repeated Games," Economics Working Papers 8736, University of California at Berkeley.
    3. Fudenberg, Drew & Maskin, Eric, 1991. "On the dispensability of public randomization in discounted repeated games," Journal of Economic Theory, Elsevier, vol. 53(2), pages 428-438, April.
    4. Michihiro Kandori & Ichiro Obara, 2006. "Efficiency in Repeated Games Revisited: The Role of Private Strategies," Econometrica, Econometric Society, vol. 74(2), pages 499-519, 03.
    5. V. Bhaskar & Ichiro Obara, . "Belief-Based Equilibria in the Repeated Prisoners' Dilemma with Private Monitoring," Penn CARESS Working Papers d93eb6f40c65728f9e1a7b114, Penn Economics Department.
    6. Kandori, Michihiro, 2002. "Introduction to Repeated Games with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 1-15, January.
    7. Piccione, Michele, 2002. "The Repeated Prisoner's Dilemma with Imperfect Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 70-83, January.
    8. Drew Fudenberg & David K Levine, 1999. "Efficiency and Observability with Long-Run and Short-Run Players," Levine's Working Paper Archive 81, David K. Levine.
    9. Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 2058, David K. Levine.
    10. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
    11. Sekiguchi, Tadashi, 1997. "Efficiency in Repeated Prisoner's Dilemma with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 76(2), pages 345-361, October.
    12. Radner, Roy, 1985. "Repeated Principal-Agent Games with Discounting," Econometrica, Econometric Society, vol. 53(5), pages 1173-98, September.
    13. George J. Mailath & Steven A. Matthews & Tadashi Sekiguchi, 2001. "Private Strategies in Finitely Repeated Games with Imperfect Public Monitoring," Penn CARESS Working Papers e7304519c6d1562163dbaf181, Penn Economics Department.
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