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Communication and Commitment with Constraints

Raghul S Venkatesh ()
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Raghul S Venkatesh: Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE

No 1856, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: An informed and an uninformed agent both contribute to a joint coordination game such that their actions are substitutable and constrained. When agents are allowed to share information prior to the coordination stage, in the absence of commitment , there is full information revelation as long as constraints are not binding. The presence of binding constraints results in only partial revelation of information in equilibrium. The most informative equilibrium is strictly pareto dominant. Allowing for limited commitment strictly increases (ex ante) welfare of both agents. I completely characterize the optimal commitment mechanism for the uninformed agent. Finally, I apply the theoretical results to the problem of information sharing and binding agreements in international alliances.

Pages: 86 pages
Date: 2018-12, Revised 2019-07
New Economics Papers: this item is included in nep-gth and nep-mic
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