Bilateral commitment

Sophie Bade, Guillaume Haeringer, Ludovic Renou

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)

Abstract

We consider non-cooperative environments in which two players have the power to gradually and unilaterally rule out some of their actions. Formally, we embed a strategic-form game into a multi-stage game, in which players can restrict their action spaces in all but the final stage, and select among the remaining actions in the last stage. We say that an action profile is implementable by commitment if this action profile is played in the last stage of a subgame-perfect equilibrium path. We provide a complete characterization of all implementable action profiles and a simple method to find them. It turns out that the set of implementable profiles does not depend on the length of the commitment process. We show, furthermore, that commitments can have social value in the sense that in some games there are implementable action profiles that dominate all Nash equilibria of the original game. © 2009 Elsevier Inc. All rights reserved.
Original languageEnglish
Pages (from-to)1817-1831
JournalJournal of Economic Theory
Volume144
DOIs
Publication statusPublished - 1 Jul 2009

Keywords

  • Commitment
  • Pareto-improvement
  • Self-enforcing

Fingerprint

Dive into the research topics of 'Bilateral commitment'. Together they form a unique fingerprint.

Cite this