Credible commitment problems are characterized by a temporal dimension (someone makes a promise today that she does not have an interest in keeping tomorrow) and by the fact that the person making the promise is not the one to benefit from the promise being kept. What are some mechanisms for dealing with credible commitment problems?
A) enforceable contracts
B) repeated interactions
C) institutions that alter the distribution of power
D) all of these

Question

Quizplus · Accepted Answer

All of the listed mechanisms can help to address credible commitment problems. Enforceable contracts provide legal recourse if one party fails to follow through on their promise. Repeated interactions create a reputation for trustworthiness and enhance the likelihood that promises will be kept. Institutions that alter the distribution of power, such as third-party mediators or binding arbitration, can help to ensure that both parties have an interest in upholding the promise. Therefore, D (all of these) is the best choice.

Credible Commitment Problems Are Characterized by a Temporal Dimension (Someone