Paper #1540

Title:

Collective commitment

Authors:

Christian Roessler, Sandro Shelegia and Bruno Strulovici

Date:

July 2016

Abstract:

We consider collective decisions made by agents whose preferences and power depend on past events and decisions. Faced with an inecient equilibrium and an opportunity to commit to a policy, can the agents reach an agreement on such a policy? We provide a consistency condition linking power structures in the dynamic setting and at the commitment stage. When the condition holds, commitment has no value: any agreement that may be reached at the outset coincides with the equilibrium without commitment. When the condition fails, as in the case of time-inconsistent preferences, commitment can improve outcomes. We discuss several applications.

JEL codes:

D70, H41, C70

Area of Research:

Business Economics and Industrial Organization

Published in:

Journal of Political Economy, forthcoming

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