TY  - JOUR
AU  - Shavell,Steven
AU  - Spier,Kathryn
TI  - Threats without Binding Commitment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5461
PY  - 1996
Y2  - February 1996
UR  - http://www.nber.org/papers/w5461
L1  - http://www.nber.org/papers/w5461.pdf
N1  - Author contact info:
Steven Shavell
Harvard Law School
1575 Massachusetts Avenue
Hauser Hall 508
Cambridge, MA  02138
Tel: 617/495-3668
Fax: 617/496-2256
E-Mail: shavell@law.harvard.edu

Kathryn E. Spier
Hauser Hall 302
Harvard Law School
1575 Massachusetts Avenue
Cambridge, MA 02138
Tel: 617/496-0019
E-Mail: kspier@law.harvard.edu
AB  - This paper explores the power of threats in the absence of binding commitment.  The threatener cannot commit to carrying out the threat if the victim refuses payment, and cannot commit to not carrying out the threat if payment is made.  If exercising the threat is costly to the threatener, then the threat cannot succeed in extracting money from the victim.  If exercising the threat would benefit the threatener, however, then the threat's success depends upon whether the threat may be repeated.  In the equilibrium of a finite-period game, the threat is carried out and the victim makes no payments.  In an infinite-horizon game, however, it is an equilibrium for the victim to make a stream of payments over time.  The expectation of future payments keeps the threatener from exercising the threat.
ER  -