Credible Commitments: Using Hostages to Support Exchange

Abstract Credible commitments and credible threats share the following common attribute: both appear mainly in conjunction with irreversible, specialized investments. But whereas credible commitments are undertaken in support of alliances and to promote exchange, credible threats appear in the context of conflict and rivalry. The former involve reciprocal acts designed to safeguard a relationship, while the latter are unilateral efforts to preempt an advantage. Efforts to support exchange generally operate in the service of efficiency; preemptive investments, by contrast, are commonly antisocial. Both are plainly important to politics and economics, but the study of credible commitments is arguably the more fundamental of the two.