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Loss of Commitment? An Evolutionary Analysis of Bagwell’s Example

  • Jörg Oechssler
  • Karl H Schlag

In a recent paper Bagwell (1995) pointed out that only the Cournot outcome, but not the Stackelberg outcome, can be supported by a pure Nash equilibrium when actions of the Stackelberg leader are observed with the slightest error. The Stackelberg outcome, however, remains close to the outcome of a mixed equilibrium. We compare the predictions in various classes of evolutionary and learning processes in this game. Only the continuous best response dynamic uniquely selects the Stackelberg outcome under noise. All other dynamics analyzed allow for the Cournot equilibrium to be selected. In typical cases Cournot is the unique long run outcome even for vanishing noise in the signal.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 598.

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Date of creation: 14 May 1997
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Handle: RePEc:cla:levarc:598
Contact details of provider: Web page: http://www.dklevine.com/

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  1. R. Cressman & K.H. Schlag, . "The Dynamic (In)Stability of Backwards Induction," ELSE working papers 027, ESRC Centre on Economics Learning and Social Evolution.
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