Review of Economic Studies Vol. 69 No. 2 2002
Gradualism and Irreversibility
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.
- DOI
- 10.1111/1467-937x.00208
- Volume
- 69
- Issue
- 2
- Pages
- 339-356
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref