Abstract
This paper considers three-level optimization problems and touches upon many issues such as information structures, incentives, threats, bluffing and organization theory. The “reverse information structure" is emphasized and in this structure the planner (“leader”) first announces his strategy, but he acts after the lower-level optimizers (“followers”) have acted. Thus he is sometimes able to force the followers to play in such a way as to help him to obtain his desired solution. The issue of whether the Planner should commit to his announced strategy or not (in the latter case he is bluffing) is also considered.
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