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Bilateral Commitment

  • Guillaume Haeringer

    (Universitat Autònoma de Barcelona)

  • Sophie Bade

    (Penn State University)

  • Ludovic Renou

    (Napier Building)

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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  1. Sophie Bade & Guillaume Haeringer & Ludovic Renou, 2005. "More Strategies, More Nash Equilibria," School of Economics Working Papers 2005-01, University of Adelaide, School of Economics.
  2. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
  3. van Damme, E.E.C. & Hurkens, J.P.M., 1996. "Endogenous Stackelberg Leadership," Discussion Paper 1996-115, Tilburg University, Center for Economic Research.
  4. Moulin, Herve, 1984. "Dominance solvability and cournot stability," Mathematical Social Sciences, Elsevier, vol. 7(1), pages 83-102, February.
  5. Matthew O. Jackson & Simon Wilkie, 2005. "Endogenous Games and Mechanisms: Side Payments Among Players," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 543-566.
  6. Admati, Anat R & Perry, Motty, 1991. "Joint Projects without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 259-76, April.
  7. Armando Gomes & Philippe Jehiel, 2005. "Dynamic Processes of Social and Economic Interactions: On the Persistence of Inefficiencies," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 626-667, June.
  8. Renou, Ludovic, 2009. "Commitment games," Games and Economic Behavior, Elsevier, vol. 66(1), pages 488-505, May.
  9. 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.
  10. Abhinay Muthoo, . "A Bargaining Model Based on the Commitment Tactic," Economics Discussion Papers 420, University of Essex, Department of Economics.
  11. Yildirim, Huseyin, 2005. "Contests with multiple rounds," Games and Economic Behavior, Elsevier, vol. 51(1), pages 213-227, April.
  12. Ben Lockwood & Jonathan P. Thomas, 2002. "Gradualism and Irreversibility," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 339-356.
  13. Oliver Hart & John Moore, 2004. "AGREEING NOW TO AGREE LATER: Contracts that Rule Out but do not Rule In," STICERD - Theoretical Economics Paper Series /2004/472, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  14. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, June.
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  17. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
  18. 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.
  19. Guillermo Caruana & Liran Einav, 2008. "A Theory of Endogenous Commitment," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 99-116.
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