Strategic Commitment Versus Flexibility in a Duopoloy with Entry and Exit

Jeffery Ely, Johannes Hörner and Wojciech Olszewski

No 1381, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

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.

Date: 2004-03-28
New Economics Papers: this item is included in nep-mac
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