Author's School

Graduate School of Arts & Sciences

Author's Department/Program

Economics

Language

English (en)

Date of Award

5-24-2012

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Chair and Committee

David Levine

Abstract

I study the impact commitment ability has on the efficiency of outcomes in bargaining scenarios and games of coordination. In the first two chapters I analyze the impact of commitment ability on two player bargaining scenarios. In particular, the commitment ability of agents is assumed to be the result of a: revoking) cost which they must pay for backing down from a stated demand. In the first chapter these costs are assumed to be common knowledge and increasing in the magnitude of concession. The agents are shown to benefit from facing higher revoking cost functions. Kalai's Proportional Bargaining Solution is shown to be a good approximation of the equilibrium shares when the cost functions are very high. While all equilibria are efficient in this setting, if the agents are uncertain about these costs when they make their demands the possibility of inefficient equilibria arises. I study this scenario in the second chapter, where the goal is to characterize the set of circumstances that lead to inefficient equilibria. I show that, contrary to models of exogenous commitment, if commitment involves an explicit choice of not backing down, uncertainty regarding revoking costs does not necessarily result in inefficiency: disagreement). If the revoking costs are highly positively correlated across players there can be no disagreement. Even when the revoking costs are independent across players, disagreement cannot arise if the distributions FOSD the uniform distribution. The third chapter considers commitment possibilities in general two player normal form games. Before playing a strategic game, players can commit to not playing some actions at some arbitrarily small cost, progressively shrinking their choice sets. It is shown that if the strategic game is a pure coordination game, the players can avoid all the inefficient Nash Equilibria if they have the ability to commit to not commit. Indeed the unique subgame perfect equilibrium outcome is the Pareto dominant outcome.

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Permanent URL: http://dx.doi.org/10.7936/K7F47M50

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