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Commitment games

Renou, Ludovic (2009) 'Commitment games.' Games and Economic Behavior, 66 (1). pp. 488-505. ISSN 0899-8256

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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.

Item Type: Article
Uncontrolled Keywords: Commitment; Efficiency; Self-enforcing agreement; Repeated games
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 07 Jan 2013 16:11
Last Modified: 07 Jan 2013 16:11
URI: http://repository.essex.ac.uk/id/eprint/5022

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