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

  • Tanja Hörtnagl

    ()

  • Rudolf Kerschbamer

    ()

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    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.

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    File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2014-03.pdf
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    Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2014-03.

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    Length: 29
    Date of creation: Feb 2014
    Date of revision:
    Handle: RePEc:inn:wpaper:2014-03
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    1. Guth, Werner & Muller, Wieland & Spiegel, Yossi, 2006. "Noisy leadership: An experimental approach," Games and Economic Behavior, Elsevier, vol. 57(1), pages 37-62, October.
    2. Barbara J. Spencer & James A. Brander, 1982. "Strategic Commitment with R&D: The Symmetric Case," Working Papers 516, Queen's University, Department of Economics.
    3. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
    4. Giovanni Maggi, 1999. "The Value of Commitment with Imperfect Observability and Private Information," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 555-574, Winter.
    5. Werner GÜTH & Georg KIRCHSTEIGER & Klaus RITZBERGER, 1995. "Imperfectly Observable Commitments in n-Player Games," Vienna Economics Papers vie9507, University of Vienna, Department of Economics.
    6. Morgan, John & Vardy, Felix, 2007. "The value of commitment in contests and tournaments when observation is costly," Games and Economic Behavior, Elsevier, vol. 60(2), pages 326-338, August.
    7. repec:ner:tilbur:urn:nbn:nl:ui:12-193644 is not listed on IDEAS
    8. Lehrer, Ehud & Rosenberg, Dinah, 2006. "What restrictions do Bayesian games impose on the value of information?," Journal of Mathematical Economics, Elsevier, vol. 42(3), pages 343-357, June.
    9. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Fischer, S. & Güth, W. & Stiehler, A. & Müller, W., 2003. "From Ultimatum to Nash Bargaining : Theory and Experimental Evidence," Discussion Paper 2003-41, Tilburg University, Center for Economic Research.
    11. Showalter, Dean M, 1995. "Oligopoly and Financial Structure: Comment," American Economic Review, American Economic Association, vol. 85(3), pages 647-53, June.
    12. Lehrer, Ehud & Rosenberg, Dinah, 2010. "A note on the evaluation of information in zero-sum repeated games," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 393-399, July.
    13. repec:ner:tilbur:urn:nbn:nl:ui:12-193643 is not listed on IDEAS
    14. Anders Poulsen & Odile Poulsen, 2008. "A note on commitment when there are errors in communication," Economics Bulletin, AccessEcon, vol. 3(74), pages 1-8.
    15. Fershtman, C & Gneezy, U, 1996. "Strategic Delegation : An Experiment," Papers 43-96, Tel Aviv.
    16. Bagwell, Kyle, 1995. "Commitment and observability in games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 271-280.
    17. Lambertini, Luca & Rossini, Gianpaolo, 1998. "Capital Commitment and Cournot Competition with Labour-Managed and Profit-Maximising Firms," Australian Economic Papers, Wiley Blackwell, vol. 37(1), pages 14-21, March.
    18. Neyman, Abraham, 1991. "The positive value of information," Games and Economic Behavior, Elsevier, vol. 3(3), pages 350-355, August.
    19. Kamien, Morton I. & Tauman, Yair & Zamir, Shmuel, 1990. "On the value of information in a strategic conflict," Games and Economic Behavior, Elsevier, vol. 2(2), pages 129-153, June.
    20. Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
    21. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
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