Bilateral Commitment. / Bade, Sophie; Haeringer, Guillaume; Renou, Ludovic.

In: Journal of Economic Theory, Vol. 144, No. 4, 07.2009, p. 1817–1831.

Research output: Contribution to journalArticlepeer-review

Published

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.
Original languageEnglish
Pages (from-to)1817–1831
Number of pages15
JournalJournal of Economic Theory
Volume144
Issue number4
Early online date3 May 2009
DOIs
Publication statusPublished - Jul 2009
This open access research output is licenced under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

ID: 9548955