commitment device
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2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Kangsik Choi ◽  
Seonyoung Lim

Abstract We examine the endogenous choice of commitment device to consumers’ expectations with network effects. Under Cournot competition, we show that choosing commitment to expectations for each firm is a dominant strategy regardless of the strength of network effects. However, under Bertrand competition, three types of commitment with both/no commitment/multiple emerge in equilibrium depending on the strength of network effects. Thus, we obtain different Pareto efficiency between Bertrand and Cournot competition, depending on the intensity of competition.


2021 ◽  
pp. 1-25
Author(s):  
Katharina Pistor

Abstract Law is a powerful commitment device. By entering into a binding contract, a contracting party can invoke the coercive law enforcement powers of states to compel another party to perform. Many, if not most, contracts are carried out without ever invoking these coercive powers; they operate in the shadow of the law. Less attention has been paid to the flip side of law’s shadow: the possibility of relaxing or suspending the full force of the law, or making law elastic. While this may seem anathema to the “rule of law”, it is not an infrequent occurrence, especially in times of crisis. The elasticity of law should be distinguished from the incompleteness of law, that is, the inherent limitation lawmakers face in trying to anticipate all future contingencies. In this paper I will offer two tales of the American Insurance Group (AIG) to illustrate the elasticity of contracts as well as of law.


2021 ◽  
Author(s):  
Laura Derksen ◽  
Jason Theodore Kerwin ◽  
Natalia Ordaz Reynoso ◽  
Olivier Sterck

Health behaviors are plagued by self-control problems, and commitment devices are frequently proposed as a solution. We show that a simple alternative works even better: appointments. We randomly offer HIV testing appointments and financial commitment devices to high-risk men in Malawi. Appointments are much more effective than financial commitment devices, more than doubling testing rates. In contrast, most men who take up financial commitment devices lose their investments. Appointments address procrastination without the potential drawback of commitment failure, and also address limited memory problems. Appointments have the potential to increase demand for healthcare in the developing world.


2021 ◽  
Author(s):  
Sudeep Bhatia ◽  
Megan M Crawford ◽  
Rebecca Louise McDonald ◽  
Miguel A. Moreno ◽  
Daniel Read

We test the hypothesis of inconsistent planning proposed by Strotz (1955). In the laboratory, participants allocated time between ‘work’ and ‘leisure’ tasks, and were offered a commitment device. Original plans tended to delay leisure, and to involve a moderate degree of spreading between work and leisure tasks. Most participants preferred commitment over flexibility. Although most were denied commitment, few altered their plans. Those that did make changes tended to further postpone leisure. We find limited evidence of discounting or impatience, contrary to the predictions of most theoretical models of inconsistent planning. Instead, our results imply a preference for improving sequences.


2021 ◽  
Vol 9 (3) ◽  
pp. 1-18
Author(s):  
Susanne Albers ◽  
Dennis Kraft

People tend to behave inconsistently over time due to an inherent present bias. As this may impair performance, social and economic settings need to be adapted accordingly. Common tools to reduce the impact of time-inconsistent behavior are penalties and prohibition. Such tools are called commitment devices. In recent work Kleinberg and Oren [6, 7] connect the design of prohibition-based commitment devices to a combinatorial problem in which edges are removed from a task graph G with n nodes. However, this problem is NP-hard to approximate within a ratio less than √n/3 [2]. To address this issue, we propose a penalty-based commitment device that does not delete edges but raises their cost. The benefits of our approach are twofold. On the conceptual side, we show that penalties are up to 1/β times more efficient than prohibition, where β ϵ (0,1] parameterizes the present bias. On the computational side, we significantly improve approximability by presenting a 2-approximation algorithm for allocating the penalties. To complement this result, we prove that optimal penalties are NP-hard to approximate within a ratio of 1.08192.


2021 ◽  
Author(s):  
Dirk E. Black ◽  
Brandon Gipper ◽  
Phillip C. Stocken

2021 ◽  
Author(s):  
Laura Derksen ◽  
Jason Kerwin ◽  
Natalia Ordaz Reynoso ◽  
Olivier Sterck

Author(s):  
Xin Dai ◽  
Yue Qiu

Abstract This paper studies the effect of common ownership on corporate social responsibility (CSR). We find that common ownership is positively associated with a firm’s CSR score. The effect is stronger for firms in more competitive industries. We propose a two-stage duopoly game in which CSR serves as a commitment device to expand output aggressively to understand the empirical results.


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