| dc.description.abstract | The current commitment versus discretion debate in economic game theory describes the government's credibility problem quite well. The commitment versus discretion argument focuses on types of institutional arrangements and the results each institution provides. Credibility relates to the commitment-discretion debate because game theorists wish to determine whether or not a government's credibility can constrain policy decisions. And if credibility is a constraint on policy, economists would like to know if one type of economic or political institution affords greater credibility than another. Since the modern discretion versus commitment debate began with Kydland and Prescott (1977) using an investment-tax credit model, the debate has spread to encompass monetary policy (Barro and Gordon, 1983), and macroeconomic policy (P&T, 1990). Other avenues of research in the commitment-discretion debate follow policy implementation after candidates are elected to office (Alesina, 1987). Thus, the results from research in the area of the commitment-discretion debate indicate that the applications are not limited exclusively to economics.
This paper will attempt to tackle a simple version of the commitment-discretion problem: the capital-levy problem in a peasant-dictator game. The problem is basically a sharing problem. Who gets how much? After characterizing the peasant-dictator game, the pertinence of institutional arrangements on a government's credibility will be clear. Institutions which create commitment and discretion will be examined in the laboratory, as will reputation, a relatively new equilibrium refinement that has characteristics of both the commitment and discretion equilibria. | en |
