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

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Author Info
Schlag, Karl H.
Jörg Oechsler

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Abstract

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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Publisher Info
Paper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 410.

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Date of creation: Jul 1997
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Handle: RePEc:bon:bonsfb:410

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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Web page: http://www.bgse.uni-bonn.de/index.php?id=517

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Related research
Keywords: imperfectly observable commitment; evolution; imitation; learning; equilibrium selection.;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kyle Bagwell, 1992. "Commitment and Observability in Games," Discussion Papers 1014, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  2. B. Adolph, . "Commitment, Trembling Hand Imperfection and Observability in Games," Sonderforschungsbereich 373 1996-84, Humboldt Universitaet Berlin.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Felix Várdy & John Morgan, 2005. "The Value of Commitment in Contests and Tournaments when Observation is Costly," Public Economics 0504005, EconWPA. [Downloadable!]
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