Discussion Paper Details

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Title: The Limits of Commitment

Author(s): Jacopo Bizzotto, Toomas Hinnosaar and Adrien Vigier

Publication Date: May 2022

Keyword(s): commitment, robustness, Sequential Games and Stackelberg competition

Programme Area(s): Industrial Organization

Abstract: We parameterize commitment in leader-follower games by letting the leader publicly choose her action set from a menu of options. We fully characterize for a large class of settings the set of equilibrium outcomes obtained when varying the degree of commitment that the leader has. We identify conditions under which giving more commitment power to the leader could end up making her worse off. Moreover, with partial commitment, the follower might obtain a larger payoff than the leader even in settings where the latter possesses a first-mover advantage under full commitment. We explore the implications of our analysis for oligopolies.

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Bibliographic Reference

Bizzotto, J, Hinnosaar, T and Vigier, A. 2022. 'The Limits of Commitment'. London, Centre for Economic Policy Research.