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Collective Commitment

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Abstract

We consider collective decisions made by agents whose preferences and power depend on past events and decisions. Faced with an inefficient 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 payoffs. We apply our result to explain inefficient collective decisions in the contexts of investment in a public good, hiring, and reform.

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  • Christian Roessler & Sandro Shelegia & Bruno Strulovici, 2015. "Collective Commitment," Vienna Economics Papers vie1507, University of Vienna, Department of Economics.
    • Handle: RePEc:vie:viennp:vie1507
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    More about this item

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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