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Bilateral Commitment

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Author Info

  • Sophie Bade

    ()
    (Department of Economics, Penn State University)

  • Guillaume Haeringer

    ()
    (Department of Economics, Universitat Autonoma de Barcelona)

  • Ludovic Renou

    (School of Economics, University of Adelaide)

Abstract

We consider non-cooperative environments in which two players have the power to commit but cannot sign binding agreements. We show that by committing to a set of actions rather than to a single action, players can implement a wide range of action profiles. We give a complete characterization of implementable profiles and provide a simple method to find them. Profiles implementable by bilateral commitments are shown to be generically inefficient. Surprisingly, allowing for gradualism (i.e., step by step commitment) does not change the set of implementable profiles.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2006-07.pdf
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Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2006-07.

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Date of creation: 2006
Date of revision:
Handle: RePEc:adl:wpaper:2006-07

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Postal: Adelaide SA 5005
Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/
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Related research

Keywords: commitment; self-enforcing; treaties; inefficiency; agreements; Pareto-improvement;

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References

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  1. Ben Lockwood & Jonathan P. Thomas, 1999. "Gradualism and Irreversibility," Discussion Paper Series, Department of Economics 199909, Department of Economics, University of St. Andrews.
  2. Bade, Sophie & Haeringer, Guillaume & Renou, Ludovic, 2007. "More strategies, more Nash equilibria," Journal of Economic Theory, Elsevier, vol. 135(1), pages 551-557, July.
  3. Abhinay Muthoo, . "A Bargaining Model Based on the Commitment Tactic," Economics Discussion Papers 420, University of Essex, Department of Economics.
  4. Oliver Hart & John Moore, 2004. "Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In," Harvard Institute of Economic Research Working Papers 2032, Harvard - Institute of Economic Research.
  5. Harris, Christopher & Reny, Philip & Robson, Arthur, 1995. "The Existence of Subgame-Perfect Equilibrium in Continuous Games with Almost Perfect Information: A Case for Public Randomization," Econometrica, Econometric Society, vol. 63(3), pages 507-44, May.
  6. B. Douglas Bernheim & Michael D. Whinston, 1997. "Incomplete Contracts and Strategic Ambiguity," Harvard Institute of Economic Research Working Papers 1787, Harvard - Institute of Economic Research.
  7. Damme, E.E.C. van & Hurkens, J.P.M., 1999. "Endogenous Stackelberg leadership," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154410, Tilburg University.
  8. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401.
  9. Admati, Anat R & Perry, Motty, 1991. "Joint Projects without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 259-76, April.
  10. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
  11. Renou, Ludovic, 2009. "Commitment games," Games and Economic Behavior, Elsevier, vol. 66(1), pages 488-505, May.
  12. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  13. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
  14. Yildirim, Huseyin, 2005. "Contests with multiple rounds," Games and Economic Behavior, Elsevier, vol. 51(1), pages 213-227, April.
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Citations

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Cited by:
  1. Heller, Yuval & Winter, Eyal, 2013. "Rule Rationality," MPRA Paper 48746, University Library of Munich, Germany.
  2. Jianpei Li & Paul Schweinzer, 2013. "Efficiency in strategic form games: A little trust can go a long way," Discussion Papers 13/19, Department of Economics, University of York.
  3. repec:hal:wpaper:halshs-00564890 is not listed on IDEAS
  4. Rohan Dutta & Ryosuke Ishii, 2013. "Coordinating by Not Committing : Efficiency as the Unique Outcome," Cahiers de recherche 10-2013, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  5. Nie, Pu-yan, 2013. "Duopoly quality commitment," Economic Modelling, Elsevier, vol. 33(C), pages 832-842.
  6. Frédéric Koessler & Ariane Lambert-Mogiliansky, 2010. "Committing to transparency to resist corruption," PSE Working Papers halshs-00564890, HAL.
  7. Conley, John P. & Neilson, William, 2009. "Endogenous games and equilibrium adoption of social norms and ethical constraints," Games and Economic Behavior, Elsevier, vol. 66(2), pages 761-774, July.

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