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, Wiley-Blackwell.
Year of publication: |
2002
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Authors: | Lockwood, Ben ; Thomas, Jonathan P. |
Published in: |
Review of Economic Studies. - Oxford University Press. - Vol. 69.2002, 2, p. 339-356
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Publisher: |
Oxford University Press |
Saved in:
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