Commitment, Trembling Hand Imperfection and Observability in Games

18 Pages Posted: 6 Feb 1997

See all articles by Brigitte Adolph

Brigitte Adolph

Humboldt University of Berlin - Faculty of Economics

Date Written: October 1996

Abstract

In an important contribution Bagwell [1995] showed that the value of commitment tends to vanish if the observability of commitments is subject to an arbitrarily small distortion, due to the possibility of misunderstanding or communication error. Bagwell's observation calls into question the many stage games that have been exceedingly popular in economics, especially in theoretical industrial organization. The present paper contributes to assess the robustness of Bagwell's result. We add other distortions to Bagwell model, such as "trembles" in players' execution of actions. We show that the unique pure strategy equilibrium of the game converges to the unique equilibrium outcome of the simultaneous move game with perfect observability if the noise associated with the observation of the leader's choice is small relative to the probability of trembles or if there are many other such imperfections. These results suggest that Bagwell's result is driven by his exclusive consideration of a particular distortion, and is not robust in the face of additional plausible distortions.

JEL Classification: D43, D82, D72

Suggested Citation

Adolph, Brigitte, Commitment, Trembling Hand Imperfection and Observability in Games (October 1996). Available at SSRN: https://ssrn.com/abstract=2159 or http://dx.doi.org/10.2139/ssrn.2159

Brigitte Adolph (Contact Author)

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany
+49 30 2093 5652 (Phone)
+49 30 2093 5619 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
251
Abstract Views
1,350
rank
132,441
PlumX Metrics