SSE Working Paper Series in Economics, Stockholm School of Economics
Observable Strategies, Commitments, and Contracts
Abstract: We consider rules (strategies, commitments, contracts, or
computer programs) that make behavior contingent on an opponent’s rule. The
set of perfectly observable rules is not well defined. Previous
contributions avoid this problem by restricting the rules deemed
admissible. We instead limit the information available about rules. Each
player can only observe which class, out of a collection of classes smaller
than the number of rules, the opponent’s rule belongs to. For any
underlying 2-player, finite, normal-form game there is a game extended with
coarsely observable strategies that has equilibria with payoffs arbitrarily
close to any feasible, individually rational payoff profile.
Keywords: Cooperation; reciprocity; transparency; commitment; contract; (follow links to similar papers)
JEL-Codes: C72; C78; D74; D86; (follow links to similar papers)
17 pages, November 12, 2014
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