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Bilateral Commitment

  • Sophie Bade
  • Guillaume Haeringer
  • Ludovic Renou

    ()

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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File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp08-20.pdf
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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 08/20.

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Date of creation: Jun 2008
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Handle: RePEc:lec:leecon:08/20
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