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Moral Cost, Commitment, and Committee Size

  • Steffen Huck
  • Kai A. Konrad

Consider a committee that in the past has made a promise not to confiscate the profits from an investor. After the investment has taken place, there is a material benefit if the committee decides to default on the earlier promise. But in some situations there are also some small moral costs for those who vote in favor of default. For the symmetric equilibrium, for given benefits of default, time-consistent default can be ruled out for sufficiently large committees.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 161 (2005)
Issue (Month): 4 (December)
Pages: 575-

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200512)161:4_575:mccacs_2.0.tx_2-2
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