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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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    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. Wieland Müller & Yossi Spiegel & Werner Güth, . "Noisy leadership: An experimental approach," Papers on Strategic Interaction 2002-10, Max Planck Institute of Economics, Strategic Interaction Group.
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    8. Felix Várdy & John Morgan, 2005. "The Value of Commitment in Contests and Tournaments when Observation is Costly," Public Economics 0504005, EconWPA.
    9. 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.
    10. Fischer, S. & Güth, W. & Müller, W. & Stiehler, A., 2006. "From ultimatum to Nash bargaining : Theory and experimental evidence," Other publications TiSEM 9d8fded2-0338-4217-afa9-1, Tilburg University, School of Economics and Management.
    11. Ehud Lehrer & Dinah Rosenberg, 2003. "What restrictions do Bayesian games impose on the value of information?," Game Theory and Information 0312005, EconWPA.
    12. Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
    13. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
    14. 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.
    15. 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.
    16. 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.
    17. 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.
    18. 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.
    19. Anders Poulsen & Odile Poulsen, 2008. "A note on commitment when there are errors in communication," Economics Bulletin, AccessEcon, vol. 3(74), pages 1-8.
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