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Collective Commitment

Christian Roessler (), Sandro Shelegia and Bruno Strulovici ()

Vienna Economics Papers from University of Vienna, Department of Economics

Abstract: 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
Date: 2015-06
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http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie1507.pdf (application/pdf)

Related works:
Journal Article: Collective Commitment (2018) Downloads
Working Paper: Collective Commitment (2016) Downloads
Working Paper: Collective commitment (2016) Downloads
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