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Endogenous and exogenous commitment

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  • Breig, Zachary

Abstract

I study a dynamic model of monopoly sales in which one long-term monopolist without exogenous commitment power interacts with a sequence of short-term consumers with private valuations. I provide a folk theorem which characterizes the payoffs of a sufficiently patient monopolist and I show that exogenous commitment power can obstruct the endogenous commitment from repeated game incentives.

Suggested Citation

  • Breig, Zachary, 2019. "Endogenous and exogenous commitment," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    • Handle: RePEc:eee:ecolet:v:183:y:2019:i:c:20
    DOI: 10.1016/j.econlet.2019.108577
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    References listed on IDEAS

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    1. Schmidt Klaus M., 1993. "Commitment through Incomplete Information in a Simple Repeated Bargaining Game," Journal of Economic Theory, Elsevier, vol. 60(1), pages 114-139, June.
    2. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1125-1156.
    3. Drew Fudenberg & David M. Kreps & Eric S. Maskin, 1990. "Repeated Games with Long-run and Short-run Players," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(4), pages 555-573.
    4. Natalia Kovrijnykh, 2013. "Debt Contracts with Partial Commitment," American Economic Review, American Economic Association, vol. 103(7), pages 2848-2874, December.
    5. Schmidt, Klaus M. & Schnitzer, Monika, 1995. "The interaction of explicit and implicit contracts," Economics Letters, Elsevier, vol. 48(2), pages 193-199, May.
    6. Pearce, David G. & Stacchetti, Ennio, 1998. "The Interaction of Implicit and Explicit Contracts in Repeated Agency," Games and Economic Behavior, Elsevier, vol. 23(1), pages 75-96, April.
    7. Oliver D. Hart & Jean Tirole, 1988. "Contract Renegotiation and Coasian Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(4), pages 509-540.
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    Cited by:

    1. Breig, Zachary, 2022. "Repeated contracting without commitment," Journal of Economic Theory, Elsevier, vol. 204(C).

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    More about this item

    Keywords

    Commitment; Mechanism design; Repeated games; Spot contracting; Renegotiation;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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