Gradualism and Irreversibility.
This paper considers a class of two-player dynamic games in which each player controls a one-dimensional action variable, interpreted as a level of cooperation. The dynamics are due to an irreversibility constraint: neither player can ever reduce his cooperation level. Payoffs are decreasing in one's own action, increasing in one's opponent's action. We characterize efficient symmetric equilibrium action paths; actions rise gradually over time and converge, when payoffs are smooth, to a level strictly below the one-shot efficient level, no matter how little discounting takes place. The analysis is extended to incorporate sequential moves and asymmetric equilibria. Copyright 2002 by The Review of Economic Studies Limited
Year of publication: |
2002
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Authors: | Lockwood, Ben ; Thomas, Jonathan P |
Published in: |
Review of Economic Studies. - Wiley Blackwell, ISSN 0034-6527. - Vol. 69.2002, 2, p. 339-56
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Publisher: |
Wiley Blackwell |
Saved in:
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