Bilateral Commitment

Sophie Bade, Guillaume Haeringer and Ludovic Renou

No 08/20, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

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

Keywords: Commitment; self-enforcing; generic inefficiency; agreements; Pareto-improvement (search for similar items in EconPapers)
JEL-codes: C70 C72 H87 (search for similar items in EconPapers)
Date: 2008-06
New Economics Papers: this item is included in nep-gth
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Bilateral commitment (2009)
Working Paper: Bilateral Commitment (2006)
Working Paper: Bilateral Commitment (2006)
Working Paper: Bilateral Commitment (2006)
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