Bilateral Commitment

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Bilateral Commitment

Author Info

Guillaume Haeringer (Universitat Autònoma de Barcelona)
Sophie Bade (Penn State University)
Ludovic Renou (Napier Building)

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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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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.75.

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Date of creation: May 2006
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Handle: RePEc:fem:femwpa:2006.75

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Paper
- Sophie Bade & Guillaume Haeringer & Ludovic Renou, 2006. "Bilateral Commitment," Working Papers 2006-07, University of Adelaide, School of Economics. [Downloadable!]

Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-07-21 (All new papers)
NEP-GTH-2006-07-21 (Game Theory)
NEP-PBE-2006-07-21 (Public Economics)

References listed on IDEAS
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