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EFG 2 R "Bagwell (GEB 1995) commitment and (un)observability" { "Player 1" "Player 2" }
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"This is a Stackelberg-type game with imperfectly observed commitment, following the
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analysis of Bagwell [^Bag1995]. The outcomes and payoffs are the same as in Bagwell's
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analysis of Bagwell [Bag1995]_. The outcomes and payoffs are the same as in Bagwell's
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model. This example sets the probability that the follower 'correctly' observes the
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leader's action as .99 (99/100). The key result is that the only pure-strategy
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equilibrium that survives if observability is imperfect is the one in which players
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choose the actions that would form an equilibrium if the game was a *simultaneous-move*
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game. There is an equilibrium in which the 'Stackelberg' action is played with high
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probability, but strictly less than one.
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[^Bag1995]: Bagwell, Kyle (1995) Commitment and observability in games.
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[Bag1995]_: Bagwell, Kyle (1995) Commitment and observability in games.
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_Games and Economic Behavior_ 8: 271-280.
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"
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