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Communication and Commitment with Constraints in International Alliances

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  • Raghul S Venkatesh

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

An informed and an uninformed agent both contribute to a joint coordination game such that their actions are substitutable and constrained. When agents are allowed to share information prior to the coordination stage, in the absence of commitment , there is full information revelation as long as constraints are not binding. The presence of binding constraints results in only partial revelation of information in equilibrium. The most informative equilibrium is strictly pareto dominant. Allowing for limited commitment strictly increases (ex ante) welfare of both agents. I completely characterize the optimal commitment mechanism for the uninformed agent. Finally, I apply the theoretical results to the problem of information sharing and binding agreements in international alliances.

Suggested Citation

  • Raghul S Venkatesh, 2019. "Communication and Commitment with Constraints in International Alliances," Working Papers halshs-01962239, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01962239
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01962239v2
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    References listed on IDEAS

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    Keywords

    strategic substitutes; commitment; cheap talk; asymmetric information;
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