Gradualism and Irreversibility

Ben Lockwood and Jonathan Thomas

CSGR Working papers series from Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick

Abstract: This paper considers a class of two-player dynamic games in which each player controls a one-dimensional variable which we interpret as a level of cooperation. In the base model, there is an irreversibility constraint stating that this variable can never be reduced, only increased. It otherwise satisfies the usual discounted repeated game assumptions. Under certain restrictions on the payoff function, which make the stage game resemble a continuous version of the Prisoners' Dilemma, we characterize efficient symmetric equilibria, and show that cooperation levels exhibit gradualism and converge to a level strictly below the one-shot efficient level: the irreversibility induces a steady-state as well as a dynamic inefficiency. As players become very patient, however, payoffs converge to (though never attain) the efficient level. We also show that a related model in which an irreversibility arises through players choosing an incremental variable, such as investment, can be transformed into the base model with similar results. Applications to a public goods sequential contribution model and a model of capacity reduction in a declining industry are discussed. The analysis is extended to incorporate partial reversibility, asymmetric equilibria, and sequential moves.

Keywords: Cooperation; repeated games; gradualism; irreversibility; public goods. (search for similar items in EconPapers)
Date: 1999-05
New Economics Papers: this item is included in nep-mic
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Related works:
Journal Article: Gradualism and Irreversibility (2002)
Working Paper: GRADUALISM AND IRREVERSIBILITY (1999)
Working Paper: Gradualism and Irreversibility (1999)
Working Paper: Gradualism and Irreversibility (1999)
Working Paper: Gradualism and Irreversibility (1999)
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