March 3, 2026

The Limits of Limited Commitment

Key Points

The study explores how different commitment structures affect a leader's payoff under duopoly conditions.
Key findings indicate that with interval partition commitment, the leader's payoff is confined between Stackelberg and Cournot outcomes.
Analysis of general commitment structures reveals that payoffs can fall below the lowest Cournot payoff in some scenarios.
Insights highlight the importance of understanding commitment mechanisms to optimize consumer and producer outcomes.

Abstract

We study limited strategic leadership. A collection of subsets covering the leader’s action space determines her commitment opportunities. We characterize the outcomes resulting from all possible commitment structures of this kind. If the commitment structure is an interval partition, then the leader’s payoff is bounded by her Stackelberg and Cournot payoffs. Under general commitment structures, the leader may obtain a payoff that is less than her lowest Cournot payoff. We apply our results to a textbook duopoly model and characterize the commitment structures leading to consumer- and producer-optimal outcomes. (JEL C72, D43)

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Cite This Study

Bizzotto et al. (Wed,) studied this question.

synapsesocial.com/papers/69a75d44c6e9836116a26fe5 https://doi.org/https://doi.org/10.1257/mic.20240310

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