Bagwell's paradox, forward induction and outside option games

In Stackelberg-like games there is an advantage of moving first. However, Bagwell (1995) shows that this result may not hold if the second player can make only imperfect observations. We explore whether this paradox also holds when the advantage comes from forward induction arguments in the class of outside option games.Bagwell's paradox, Commitment, Observability, Noise, Outside option games, Forward induction

Bagwell's paradox, forward induction and outside option games

In Stackelberg-like games there is an advantage of moving first. However, Bagwell (1995) shows that this result may not hold if the second player can make only imperfect observations. We explore whether this paradox also holds when the advantage comes from forward induction arguments in the class of outside option games

A NOTE ON BAGWELL'S PARADOX AND FORWARD INDUCTION IN THREE CLASSIC GAMES

Stackelberg-like games show a situation where there is a clear advantage in moving first. In a thought provoking article, Bagwell [1995] shows that this advantage may not be robust against imperfect observations of the first move. We explore these ideas in the context of forward induction in three classic games, namely, the outside option game, the game of burning a dollar before the battle of the sexes and the beer-quiche game.Bagwell's paradox, noise, battle of the sexes, Beer-Quiche game, outside option, forward induction, JEL Numbers: C72, JEL Numbers: G13, JEL Numbers: L13