The role of commitments in noncooperative games is well acknowledged and documented. One way to achieve commitments is by letting delegates represent the players of a game. In this paper we study a delegation game in which the players can use agents strategically to play on their behalf and the contracts they sign with them are common knowledge. We show that in such cases every Pareto optimal outcome of the game can become the unique subgame perfect Nash equilibrium of the delegation game. We demonstrate this result by discussing the Cournot-type duopolistic game.
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International Economic Review
© 1991 Economics Department of the University of Pennsylvania
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