Bilateral Commitment
Date
01.01.2006
01.01.2006
Authors
Guillaume Haeringer, Sophie Bade, Ludovic Renou
JEL Code
C70,C72,H87
C70,C72,H87
Keywords:
Commitment,Self-enforcing,Treaties,Inefficiency,Agreements,Pareto-improvement
Commitment,Self-enforcing,Treaties,Inefficiency,Agreements,Pareto-improvement
Publisher
Climate Change and Sustainable Development
Climate Change and Sustainable Development
Editor
Carlo Carraro
Carlo Carraro
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.