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Strategic Commitment Versus Flexibility in a Duopoloy with Entry and Exit

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  • Jeffery Ely
  • Johannes Horner
  • Wojciech Olszewski

Abstract

We introduce a class of strategies which generalizes examples constructed in two-player games under imperfect private monitoring. A sequential equilibrium is belief-free if, after every private history, each player.s continuation strategy is optimal independently of his belief about his opponents. private histories. We provide a simple and sharp characterization of equililibrium payos using those strategies. While such strategies have desirable robustness properties, they are not rich enough to generate a folk theorem in most games besides the prisoner's dilemma, even when noise vanishes.

Suggested Citation

  • Jeffery Ely & Johannes Horner & Wojciech Olszewski, 2004. "Strategic Commitment Versus Flexibility in a Duopoloy with Entry and Exit," Discussion Papers 1381, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1381
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