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Bilateral commitment

By Sophie Bade, Guillaume Haeringer and Ludovic Renou

Abstract

We consider non-cooperative environments in which two players have the power to commit\ud but cannot sign binding agreements. We show that by committing to a set of actions\ud rather than to a single action, players can implement a wide range of action profiles. We\ud give a complete characterization of implementable profiles and provide a simple method to\ud find them. Profiles implementable by bilateral commitments are shown to be generically\ud inefficient. Surprisingly, allowing for gradualism (i.e., step by step commitment) does not\ud change the set of implementable profile

Topics: Commitment, self-enforcing, generic inefficiency, agreements, Pareto-improvement
Publisher: Dept. of Economics, University of Leicester
Year: 2008
OAI identifier: oai:lra.le.ac.uk:2381/7523

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