Bagwell's paradox, forward induction and outside option games
In Stackelberg-like games there is an advantage of moving first. However, Bagwell (1995) shows that this result may not hold if the second player can make only imperfect observations. We explore whether this paradox also holds when the advantage comes from forward induction arguments in the class of outside option games.
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- van Damme, Eric, 1989.
"Stable equilibria and forward induction,"
Journal of Economic Theory,
Elsevier, vol. 48(2), pages 476-496, August.
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