Voluntary Commitments Lead to Efficiency

Real world players often increase their payo¤s by voluntarily committing to play a …xed strategy, prior to the start of a strategic game. In fact, the players may further bene…t from commitments that are conditional on the commitments of others. This paper proposes a model of conditional commitments that uni…es earlier models while avoiding circularities that often arise in such models. A commitment folk theorem shows that the potential of voluntary conditional commitments is essentially unlimited. All feasible and individuallyrational payo¤s of a two-person strategic game can be attained at the equilibria of one (universal) commitment game that uses simple commitment devices. The commitments are voluntary in the sense that each player maintains the option of playing the game without commitment, as originally de…ned.