Commitments in Extensive Form Games

Abstract

We consider extensive-form games in which players have the option to commit to actions before the game is played. We focus on commitment procedures where players make voluntary irreversible commitments in a prescribed order over the decision nodes. We study whether such commitment procedures may lead to Pareto-efficient outcomes. Our main positive result is surprisingly positive:For two-player games, we introduce an order over the decision nodes for which the unique sub-game perfect equilibrium outcome is Pareto efficient regardless of the actual payoffs. We show an impossibility result for games with four players.