Christian Roessler (),
Sandro Shelegia and
Bruno Strulovici ()
Vienna Economics Papers from University of Vienna, Department of Economics
We consider collective decisions made by agents whose preferences and power depend on past events and decisions. Faced with an inecient equilibrium and an opportunity to commit to a policy, can the agents reach an agreement on such a policy? Under an intuitive condition linking power structures in the dynamic setting and at the commitment stage, the answer is negative: when the condition holds, the only agreement that may be reached at the outset, if any, coincides with the equilibrium without commitment. The condition is also necessary: when it fails, as in the case of a single time-inconsistent agent, commitment is valuable for some payo s. We apply our result to explain inecient collective decisions in the contexts of investment in a public good, hiring, and reform.
JEL-codes: D70 H41 C70 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-mic and nep-net
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Working Paper: Collective Commitment (2016)
Working Paper: Collective commitment (2016)
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Persistent link: http://EconPapers.repec.org/RePEc:vie:viennp:1507
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