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Posterior renegotiation-proofness in a two-person decision problem

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  • Kei Kawakami

    (University of Melbourne)

Abstract

When two agents with private information use a mechanism to determine an outcome, what happens if they are free to revise their messages and cannot commit to a mechanism? We study this problem by allowing agents to hold on to a proposed outcome in one mechanism while they play another mechanism and learn new information. A decision rule is posterior renegotiation-proof if it is posterior implementable and robust to a posterior proposal of any posterior implementable decision rule. We identify conditions under which such decision rules exist. We also show how the inability to commit to the mechanism constrains equilibrium: a posterior renegotiation-proof decision rule must be implemented with at most five messages for two agents.

Suggested Citation

  • Kei Kawakami, 2016. "Posterior renegotiation-proofness in a two-person decision problem," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(4), pages 893-931, November.
    • Handle: RePEc:spr:jogath:v:45:y:2016:i:4:d:10.1007_s00182-015-0491-9
    DOI: 10.1007/s00182-015-0491-9
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    References listed on IDEAS

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    1. Michel Poitevin, 2000. "Can the theory of incentives explain decentralization?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(4), pages 878-906, November.
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    4. Jehiel, Philippe & Meyer-ter-Vehn, Moritz & Moldovanu, Benny & Zame, William R., 2007. "Posterior implementation vs ex-post implementation," Economics Letters, Elsevier, vol. 97(1), pages 70-73, October.
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    Cited by:

    1. Heller, Yuval & Kuzmics, Christoph, 2024. "Communication, renegotiation and coordination with private values," Games and Economic Behavior, Elsevier, vol. 143(C), pages 51-76.
    2. Yuval Heller & Christoph Kuzmics, 2019. "Renegotiation and Coordination with Private Values," Graz Economics Papers 2019-10, University of Graz, Department of Economics.

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    More about this item

    Keywords

    Information aggregation; Limited commitment; Posterior efficiency; Posterior implementation; Renegotiation-proofness;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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