This paper presents a simple repeated-game model of interaction between the government and the private sector where, at each repetition, the government first makes a non-binding announcement about its future actions. The private sector, unsure whether or not this announcement will be respected,...

A wealth of literature, reviewed in the first section of this paper, is concerned with the occurence of multiple equilibria in economic optimization models and with the resulting history dependence of optimal solutions. Typically, the existence of multiple equilibria is associated with market...

As Posner (1997) has observed, when individuals in a relationship can commit to imposing costs upon each other then efficient behavior in the absence of law is possible. The question is whether efficient norms of behavior evolve endogenously in a population. We show that in a standard hold up...