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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. Fudenberg, D. & Maskin, E., 1990. "Nash and perfect equilibria of discounted repeated games," Journal of Economic Theory, Elsevier, vol. 51(1), pages 194-206, June.
    2. Radner, Roy, 1985. "Repeated Principal-Agent Games with Discounting," Econometrica, Econometric Society, vol. 53(5), pages 1173-98, September.
    3. George J. Mailath & Stephen Morris, 2000. "Repeated Games with Almost-Public Monitoring," Econometric Society World Congress 2000 Contributed Papers 0661, Econometric Society.
    4. Drew Fudenberg & Eric Maskin, 1987. "On the Dispensability of Public Randomization in Discounted Repeated Games," Working papers 467, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. 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.
    6. Levine, David & Fudenberg, Drew, 1994. "Efficiency and Observability with Long-Run and Short-Run Players," Scholarly Articles 3203774, Harvard University Department of Economics.
    7. V. Bhaskar & Ichiro Obara, . "Belief-Based Equilibria in the Repeated Prisoners' Dilemma with Private Monitoring," Penn CARESS Working Papers d93eb6f40c65728f9e1a7b114, Penn Economics Department.
    8. Mailath George J. & Matthews Steven A. & Sekiguchi Tadashi, 2002. "Private Strategies in Finitely Repeated Games with Imperfect Public Monitoring," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 2(1), pages 1-23, June.
    9. Fudenberg, D. & Levine, D.K. & Maskin, E., 1989. "The Folk Theorem With Inperfect Public Information," Working papers 523, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
    11. Kandori, Michihiro, 2002. "Introduction to Repeated Games with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 1-15, January.
    12. Piccione, Michele, 2002. "The Repeated Prisoner's Dilemma with Imperfect Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 70-83, January.
    13. Sekiguchi, Tadashi, 1997. "Efficiency in Repeated Prisoner's Dilemma with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 76(2), pages 345-361, October.
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