{"ID":2884025,"CreatedAt":"2026-06-01T04:54:23.091178241Z","UpdatedAt":"2026-06-01T04:54:23.091178241Z","DeletedAt":null,"paper_url":"https://arxiv.org/abs/2508.07147","arxiv_id":"2508.07147","title":"Maximizing Social Welfare with Side Payments","abstract":"We examine normal-form games in which players may \\emph{pre-commit} to outcome-contingent transfers before choosing their actions. In the one-shot version of this model, Jackson and Wilkie showed that side contracting can backfire: even a game with a Pareto-optimal Nash equilibrium can devolve into inefficient equilibria once unbounded, simultaneous commitments are allowed. The root cause is a prisoner's dilemma effect, where each player can exploit her commitment power to reshape the equilibrium in her favor, harming overall welfare. To circumvent this problem we introduce a \\emph{staged-commitment} protocol. Players may pledge transfers only in small, capped increments over multiple rounds, and the phase continues only with unanimous consent. We prove that, starting from any finite game $Γ$ with a non-degenerate Nash equilibrium $\\vecσ$, this protocol implements every welfare-maximizing payoff profile that \\emph{strictly} Pareto-improves $\\vecσ$. Thus, gradual and bounded commitments restore the full efficiency potential of side payments while avoiding the inefficiencies identified by Jackson and Wilkie.","short_abstract":"We examine normal-form games in which players may \\emph{pre-commit} to outcome-contingent transfers before choosing their actions. In the one-shot version of this model, Jackson and Wilkie showed that side contracting can backfire: even a game with a Pareto-optimal Nash equilibrium can devolve into inefficient equilibr...","url_abs":"https://arxiv.org/abs/2508.07147","url_pdf":"https://arxiv.org/pdf/2508.07147v1","authors":"[\"Ivan Geffner\",\"Caspar Oesterheld\",\"Vincent Conitzer\"]","published":"2025-08-10T02:40:17Z","proceeding":"cs.GT","tasks":"[\"cs.GT\",\"econ.TH\"]","methods":"[]","has_code":false}