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

Tanja Hörtnagl () and Rudolf Kerschbamer

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

Abstract: 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.

Keywords: Value of Information; Value of Commitment; Sequential Move Game; Imperfect Observability; Stackelberg Duopoly; First-Mover Advantage (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 L13 (search for similar items in EconPapers)
Pages: 29
Date: 2014-02
New Economics Papers: this item is included in nep-com, nep-cta, nep-ict and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2014-03

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