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64Principle · Group 8

Credible Commitment

Credible commitment in game theory

“If you visibly commit yourself and cut off your own retreat, you make your announcement credible and force others to adjust to it.”

Talk is cheap. A threat or a promise works only if the other person believes you will follow through.

Group 8: Interaction, Alliances and NegotiationT5 Game Theory, Negotiation and Conflict
Go to the in-depth section ↓
Two dots glide toward each other on a narrow line, with a pale frame flickering above each. At the turning point, the left dot visibly cuts the line behind it, its frame becomes solid and golden, and the right dot swerves aside in an arc; a small counter-image shows the hidden cut, where no frame lights up and the two dots collide.
In short

If you visibly commit yourself and cut off your own retreat, you make your announcement credible and force others to adjust to it.

What it’s about: Talk is cheap. A threat or a promise works only if the other person believes you will follow through. Many announcements are empty because, when it comes to the crunch, the person making them would rather give in, and the other side knows it. You become credible when you change your situation so that giving in becomes impossible or very costly for you. Then it is rational for the other person to adjust to your commitment.

In depth

The principle in detail

Three steps through the principle: grasp it, place it, put it to work. Open each topic on its own.

The core messageCore statement and 3 clarifications
In essence

A commitment works when backing down costs you more than holding firm, and others can see that.

It does not say
That being loud creates credibility. A threat you cannot or will not carry out squanders it.
It does not say
That committing yourself is always wise. If you bind yourself, you also lose good compromises and the chance to correct mistakes.
It also says
A commitment no one knows about achieves nothing.
The explanationThe paradox: by taking options away from yourself, you gain influence over other people’s decisions.

The paradox: by taking options away from yourself, you gain influence over other people’s decisions. The price is room to maneuver.

The question

Which of your announcements do people believe, and what have you put at stake to back them up?

The signs3 signs when you heed it · 3 when you overlook it
When you heed it
  • You announce little and follow through on it.
  • You make important commitments publicly, in writing or through a rule.
  • Beforehand, you check what will happen if the other side commits itself as well.
When you overlook it
  • People laugh off your threats because you never carry them out.
  • You commit yourself in private, and no one adjusts to it.
  • Or you have bound yourself so rigidly that you can no longer change course when the situation changes.
The backgroundFrom Thomas C. Schelling’s book “The Strategy of Conflict” (1960). · T5 Game Theory, Negotiation and Conflict
  1. 1960
    OriginThomas C. Schelling

    The Strategy of Conflict

  2. 1977
    SupplementedFinn E. Kydland and Edward C. Prescott

    Rules Rather than Discretion: The Inconsistency of Optimal Plans

  3. 1991
    SupplementedAvinash K. Dixit and Barry J. Nalebuff

    Thinking Strategically

  4. Tradition T5
    TraditionGame Theory, Negotiation and Conflict

    Thomas C. Schelling, Robert Axelrod, Herman Kahn, Roger Fisher and William Ury

    See the tradition on the Origin page
Read more: the full background

From Thomas C. Schelling’s book “The Strategy of Conflict” (1960). Supplemented by Finn E. Kydland and Edward C. Prescott (1977) and Avinash K. Dixit and Barry J. Nalebuff’s “Thinking Strategically” (1991); the idea was already familiar to commanders who burned their bridges behind them.

The research3 sources: 1 classic, 1 theory, 1 review · 1960–1991 · with limitations of the research
3 sources1960–1991 period1 classic1 theory1 review
Strength of evidence
  1. weak
  2. moderate
  3. strong

Game theory and economic policy have worked out the principle thoroughly; the sources cited are theory and models, not measurements in everyday leadership.

  1. 1960
    Classic
    Thomas C. Schelling

    “The Strategy of Conflict”: whoever commits credibly first often prevails in negotiations; the power to bind oneself is a form of bargaining power in its own right.

  2. 1977
    Theory
    Finn E. Kydland and Edward C. Prescott

    “Rules Rather than Discretion: The Inconsistency of Optimal Plans” (Journal of Political Economy): case-by-case decisions miss the goal because people adjust their behavior to the policy they expect in the future; fixed rules do better.

  3. 1991
    Review
    Avinash K. Dixit and Barry J. Nalebuff

    “Thinking Strategically”: presents commitment and other ideas from game theory to a broad audience.

Where the research reaches its limits
  • Commitment also takes away good compromises and the opportunity to correct mistakes.
  • If both sides commit themselves at the same time, a collision can become unavoidable.
  • It works only if it is visible and the other side understands it; it can “force” only someone who is not yet bound themselves.
Read more: what research shows

Thomas C. Schelling developed the principle in “The Strategy of Conflict” in 1960. He shows that in negotiations it is often not the stronger party that wins but the one that first commits itself credibly, and he describes the power to bind oneself as a form of bargaining power in its own right. In 2005, he and Robert J. Aumann received the Nobel Prize in Economics for their work on the game theory of conflict and cooperation. In 1977, Finn E. Kydland and Edward C. Prescott showed that plans that seem optimal today become inconsistent over time, because people adjust their behavior to the policy they expect in the future; they therefore recommend rules rather than case-by-case decisions. In 1991, Avinash K. Dixit and Barry J. Nalebuff presented the principle to a broad audience. These sources do not measure the effect of commitment.

The related principles66 Brinkmanship · 68 Escalation Ladder · 69 Best Alternative · 85 Death Ground
BrinkmanshipEscalation Ladder

The principle is carried further by 66 Brinkmanship (if you commit yourself, you can create a shared risk) and 68 Escalation Ladder (commitment makes it believable that the next rung will follow)

Best Alternative

69 Best Alternative shows that if you commit yourself, you deliberately worsen your own alternative

Death Ground

85 Death Ground is an early form: troops with no way back fight with greater resolve

Read more: the full text

The principle is carried further by 66 Brinkmanship (if you commit yourself, you can create a shared risk) and 68 Escalation Ladder (commitment makes it believable that the next rung will follow); 69 Best Alternative shows that if you commit yourself, you deliberately worsen your own alternative. 85 Death Ground is an early form: troops with no way back fight with greater resolve.

The action steps5 action steps: Announce only what you can and will follow through on.
  1. Announce only what you can and will follow through on. Every empty threat weakens the next one.
  2. Make a commitment visible: in front of your team, in writing, with a deadline or a rule that applies to everyone.

  3. Put your reputation on the line deliberately where a lot is at stake, not over every little thing.

  4. Check beforehand whether the other side is committing itself at the same time. Two hard commitments against each other end in a collision.

  5. Decide under what circumstances you will review a commitment before the situation forces you to.

The reflection questions3 questions: Which of your threats or promises does no one believe anymore, and why?
  1. Which of your threats or promises does no one believe anymore, and why?
  2. Where have you committed yourself without the others knowing about it?
  3. Which commitment is holding you back right now, even though the situation has changed?

Take your time with one question. Write down your answer – or talk it over with someone you trust.

To finish
The picture to rememberThe animation once more, with an explanation
  1. Two dots glide toward each other on a narrow line, with a pale frame flickering above each
  2. At the turning point, the left dot visibly cuts the line behind it, its frame becomes solid and golden, and the right dot swerves aside in an arc
  3. A small counter-image shows the hidden cut, where no frame lights up and the two dots collide
Strategy Check

Which announcement will you follow through on?

Get your profile across all 12 groups in about 10 to 15 minutes.

Start the Strategy Check
In context

Group 8: Interaction, Alliances and Negotiation

Guiding question: How do you act when others are in the game too?

Stage 4 of 5: Act with others

Where the 92 principles come from: eight traditions of strategy, from classical war theory to dealing with uncertainty.

More about the origin

Background: WEGVISOR’s own selection from the strategy literature · More about the origin

Examples

The principle in practice

From the different spheres of society.

Government

Ronald Reagan, the Air Traffic Controllers and Credible Commitment

In August 1981, around 13,000 American air traffic controllers go on strike, even though the law forbids it. President Ronald Reagan issues an ultimatum and then fires more than 11,000 of them. With this step, he makes good on his threat and makes every future threat credible.

Credible Commitment
Faith

Martin Luther, the Papal Bull and Credible Commitment

On December 10, 1520, outside the Elster Gate in Wittenberg, Martin Luther throws the papal bull threatening him with excommunication into the fire. With this public act, he rules out any way back. Friends and opponents now know: he will not recant.

Credible Commitment
Business

Mario Draghi, the Euro and Credible Commitment

In the summer of 2012, the financial markets are betting on a breakup of the euro. Mario Draghi, president of the European Central Bank, pledges to do whatever it takes to preserve it. Interest rates for Spain and Italy fall significantly, and the purchase program the ECB then creates is never used during the crisis.

Credible Commitment
Government

Movie: Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb

In Stanley Kubrick’s 1964 satire, the Soviet Union has built a Doomsday Machine that goes off automatically in the event of an attack. It is the perfect commitment and at the same time completely useless, because no one knows about it.

Credible Commitment
FAQ

Questions about Credible Commitment

What does Credible Commitment say?

You gain influence when you visibly commit yourself and cut off your own retreat. Because you can no longer give in, others adjust to you.

Where does Credible Commitment come from?

Thomas C. Schelling developed it in “The Strategy of Conflict” in 1960. For this and other work on game theory, he received the Nobel Prize in Economics in 2005.

What are some examples?

Ronald Reagan’s firing of the air traffic controllers in 1981, Martin Luther’s burning of the papal bull threatening him with excommunication in 1520 and Mario Draghi’s pledge on the euro in 2012. In film, “Dr. Strangelove” shows it.

How well is Credible Commitment supported by research?

Evidence: moderate – game theory and economic policy have worked out the principle thoroughly; the sources cited are theory and models, not measurements in everyday leadership.

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