Journal Article

Gradualism and Irreversibility

Ben Lockwood and Jonathan P. Thomas

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 69, issue 2, pages 339-356
Published in print April 2002 | ISSN: 0034-6527
Published online April 2002 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00208
Gradualism and Irreversibility

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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.

Journal Article.  0 words. 

Subjects: Economics

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