The Limits of Limited Commitment

Bizzotto, Jacopo; Hinnosaar, Toomas; Vigier, Adrien

doi:10.1257/mic.20240310

Abstract

We study limited strategic leadership. A collection of subsets covering the leader鈥檚 action space determines her commitment opportunities. We characterize the outcomes resulting from all possible commitment structures of this kind. If the commitment structure is an interval partition, then the leader鈥檚 payoff is bounded by her Stackelberg and Cournot payoffs. Under general commitment structures the leader may obtain a payoff that is less than her lowest Cournot payoff. We apply our results to a textbook duopoly model and characterize the commitment structures leading to consumer- and producer-optimal outcomes.

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蝌蚪网 Journal:
Microeconomics