Gradualism and irreversibility

B Lockwood, J P Thomas

    Research output: Contribution to journalArticlepeer-review

    44 Citations (Scopus)

    Abstract

    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.

    Original languageEnglish
    Pages (from-to)339-356
    Number of pages18
    JournalReview of Economic Studies
    Volume69
    Publication statusPublished - Apr 2002

    Keywords

    • TRADE LIBERALIZATION

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