A note on commitment when there are errors in communication

Anders Poulsen () and Odile Poulsen

Economics Bulletin, 2008, vol. 3, issue 74, 1-8

Abstract: In this note we analyze the viability of a commitment strategy when there are errors in communication. We consider an entry deterrence game where with a certain probability the Incumbent's decision is either perfectly observed by the Potential Intruder or, with complementary probability, nothing is observed. We find that in equilibrium the Incumbent benefits as much from a decision to accommodate entry as a commitment to fight entry being observed with sufficiently high probability by the potential intruder. Indeed, there is an equilibrium where the Incumbent commits to fight entry with probability one even when this action is observed with zero probability.

JEL-codes: C7 (search for similar items in EconPapers)
Date: 2008-11-07
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