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Promises and Conventions - An Approach to Pre-play Agreements

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  • Topi Miettinen

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Abstract

Experiments suggest that communication increases the contribution to public goods (Ledyard, 1995). There is also evidence that, when contemplating a lie, people trade off their private benefit from the lie with the harm it inflicts on others (Gneezy, 2005). We develop a model of bilateral pre-play agreements that assumes the latter and implies the former. A preference for not lying provides a partial commitment device that enables informal agreements. We establish some general properties of the set of possible agreements in normal form games and characterize the smallest and largest such set. In symmetric games, pre-play agreements crucially depend on whether actions are strategic complements or substitutes. With strategic substitutes, commitment power tends to decrease in efficiency whereas the opposite may be true with strategic complements.

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Bibliographic Info

Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2006-29.

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Length: 33 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:esi:discus:2006-29

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Keywords: pre-play negotiations; communication; social norms; agreements; guilt;

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Citations

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Cited by:
  1. Topi Miettinen, 2007. "Moral Hazard and Clear Conscience," Jena Economic Research Papers 2007-008, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Demichelis, Stefano & Weibull, Jörgen, 2006. "Efficiency, communication and honesty," Working Paper Series in Economics and Finance 645, Stockholm School of Economics, revised 28 Nov 2006.
  3. Stefano Demichelis & Jörgen W. Weibull, 2007. "Language, meaning and games: a model of communication, coordination and evolution," Carlo Alberto Notebooks 61, Collegio Carlo Alberto.
  4. Nathan Berg & Donald Lien, 2009. "Sexual orientation and self-reported lying," Review of Economics of the Household, Springer, vol. 7(1), pages 83-104, March.
  5. Wengström, Erik, 2007. "Setting the Anchor: Price Competition, Level-n Theory and Communication," Working Papers 2007:6, Lund University, Department of Economics.

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