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Title: Bilateral commitment
Authors: Bade, Sophie
Haeringer, Guillaume
Renou, Ludovic
First Published: Jul-2009
Publisher: Elsevier
Citation: Journal of Economic Theory, 2009, 144 (4), pp. 1817-1831.
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.
DOI Link: 10.1016/j.jet.2009.03.004
ISSN: 0022-0531
Type: Article
Rights: This is the author's final draft of the paper published as Journal of Economic Theory, 2009, 144 (4), pp. 1817-1831. The final version is available from Doi: 10.1016/j.jet.2009.03.004
Appears in Collections:Published Articles, Dept. of Economics

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