Joint Projects without Commitment.

Admati, Anat R.; Perry, Motty

This paper concerns the pattern of contributions to a joint project when commitments and enforceable contracts are not available. We analyse a game in which partners alternate in making contributions to the project until the project is completed. Contributions are sunk when they are made. The game has a unique subgame perfect equilibrium path, which is inefficient in the sense that socially desirable projects may not be completed. By contrast, in a "subscription game" in which the cost of the contribution is borne only if and when the contributions committed to the project cover its cost, the outcome is efficient.

GAME theory; JOINT ventures; COOPERATION; DECISION theory; DECISION making; EQUILIBRIUM; MATHEMATICAL models; ECONOMIC equilibrium; ECONOMICS

Review of Economic Studies, 1991, Vol 58, Issue 2, p259

0034-6527

Academic Journal

10.2307/2297967