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Renegotiation-proof relational contracts

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  • Goldlücke, Susanne
  • Kranz, Sebastian

Abstract

We study infinitely repeated two-player games with perfect monitoring and assume that each period consists of two stages: one in which the players simultaneously choose an action and one in which they can transfer money to each other. In the first part of the paper, we derive simple conditions that allow a constructive characterization of all Pareto-optimal subgame perfect payoffs for all discount factors. In the second part, we examine different concepts of renegotiation-proofness and extend the characterization to renegotiation-proof payoffs.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 80 (2013)
Issue (Month): C ()
Pages: 157-178

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Handle: RePEc:eee:gamebe:v:80:y:2013:i:c:p:157-178

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Web page: http://www.elsevier.com/locate/inca/622836

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  1. Mailath, George J. & Obara, Ichiro & Sekiguchi, Tadashi, 2002. "The Maximum Efficient Equilibrium Payoff in the Repeated Prisoners' Dilemma," Games and Economic Behavior, Elsevier, vol. 40(1), pages 99-122, July.
  2. Goldlücke, Susanne & Kranz, Sebastian, 2012. "Infinitely repeated games with public monitoring and monetary transfers," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1191-1221.
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  4. Miklos-Thal, Jeanine, 2008. "Optimal Collusion under Cost Asymmetry," MPRA Paper 11044, University Library of Munich, Germany.
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  9. McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-50, April.
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  11. Farrell, Joseph & Maskin, Eric, 1987. "Renegotiation in Repeated Games," Department of Economics, Working Paper Series qt9wv3h5jb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  12. Jonathan Levin, 2000. "Relational Incentive Contracts," Working Papers 01002, Stanford University, Department of Economics.
  13. Andersson, Ola & Wengstrom, Erik, 2007. "A note on renegotiation in repeated Bertrand duopolies," Economics Letters, Elsevier, vol. 95(3), pages 398-401, June.
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Cited by:
  1. Sebastian Kranz, 2013. "Relational Contracting, Repeated Negotiations, and Hold-Up," Cowles Foundation Discussion Papers 1888, Cowles Foundation for Research in Economics, Yale University.
  2. David A. Miller & Joel Watson, 2013. "A Theory of Disagreement in Repeated Games With Bargaining," Econometrica, Econometric Society, vol. 81(6), pages 2303-2350, November.

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