The Limits of Limited Commitment

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 elicit the commitment structures leading to consumer- and producer-optimal outcomes.

Keywords: commitment, Stackelberg, Cournot, information design

JEL Classification: C72, D43, D82