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Contract Negotiation and the Coase Conjecture: A Strategic Foundation for Renegotiation‐Proof Contracts

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  • Bruno Strulovici

Abstract

What does contract negotiation look like when some parties hold private information and negotiation frictions are negligible? This paper analyzes this question and provides a foundation for renegotiation‐proof contracts in this environment. The model extends the framework of the Coase conjecture to situations in which the quantity or quality of the good is endogenously determined and to more general environments in which preferences are nonseparable in the traded goods. As frictions become negligible, all equilibria converge to a unique outcome which is separating, efficient, and straightforward to characterize.

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  • Bruno Strulovici, 2017. "Contract Negotiation and the Coase Conjecture: A Strategic Foundation for Renegotiation‐Proof Contracts," Econometrica, Econometric Society, vol. 85, pages 585-616, March.
    • Handle: RePEc:wly:emetrp:v:85:y:2017:i::p:585-616
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    Cited by:

    1. Gretschko, Vitali & Wambach, Achim, 2017. "Contract Design With Limited Commitment," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168269, Verein für Socialpolitik / German Economic Association.
    2. Ambec, Stefan & Coria, Jessica, 2021. "The informational value of environmental taxes," Journal of Public Economics, Elsevier, vol. 199(C).
    3. Beccuti, Juan & Möller, Marc, 2021. "Screening by mode of trade," Games and Economic Behavior, Elsevier, vol. 129(C), pages 400-420.
    4. Yuval Heller & Christoph Kuzmics, 2019. "Renegotiation and Coordination with Private Values," Graz Economics Papers 2019-10, University of Graz, Department of Economics.
    5. Heller, Yuval & Kuzmics, Christoph, 2020. "Communication, Renegotiation and Coordination with Private Values (Extended Version)," MPRA Paper 102926, University Library of Munich, Germany, revised 26 Jul 2021.
    6. S. Nageeb Ali & Navin Kartik & Andreas Kleiner, 2023. "Sequential Veto Bargaining With Incomplete Information," Econometrica, Econometric Society, vol. 91(4), pages 1527-1562, July.
    7. Ekmekci, Mehmet & Maestri, Lucas, 2019. "Reputation and screening in a noisy environment with irreversible actions," MPRA Paper 100885, University Library of Munich, Germany.
    8. Heller, Yuval & Kuzmics, Christoph, 2024. "Communication, renegotiation and coordination with private values," Games and Economic Behavior, Elsevier, vol. 143(C), pages 51-76.
    9. Doval, Laura & Skreta, Vasiliki, 0. "Optimal mechanism for the sale of a durable good," Theoretical Economics, Econometric Society.
    10. Qingmin Liu & Konrad Mierendorff & Xianwen Shi & Weijie Zhong, 2019. "Auctions with Limited Commitment," American Economic Review, American Economic Association, vol. 109(3), pages 876-910, March.
    11. Dutta, Prajit K., 2021. "Compromise is key in infinitely repeated bargaining with an Evergreen Clause," Journal of Economic Theory, Elsevier, vol. 193(C).
    12. Laura Doval & Vasiliki Skreta, 2022. "Mechanism Design With Limited Commitment," Econometrica, Econometric Society, vol. 90(4), pages 1463-1500, July.
    13. Guo, Qiaozhen & He, Qiao-Chu & Chen, Ying-Ju & Huang, Wei, 2021. "Poverty mitigation via solar panel adoption: Smart contracts and targeted subsidy design," Omega, Elsevier, vol. 102(C).
    14. Brzustowski, Thomas & Georgiadis Harris, Alkis & Szentes, Balázs, 2023. "Smart contracts and the Coase conjecture," LSE Research Online Documents on Economics 117950, London School of Economics and Political Science, LSE Library.
    15. Chang, Dongkyu & Lee, Jong Jae, 2022. "Price skimming: Commitment and delay in bargaining with outside option," Journal of Economic Theory, Elsevier, vol. 205(C).
    16. Beccuti, Juan & Möller, Marc, 2018. "Dynamic adverse selection with a patient seller," Journal of Economic Theory, Elsevier, vol. 173(C), pages 95-117.
    17. Gerardi, Dino, 2018. "Dynamic Contracting with Limited Commitment and the Ratchet Effect," CEPR Discussion Papers 12699, C.E.P.R. Discussion Papers.
    18. Feng, Zhuo & Zhang, Yiwen & Zhang, Shuibo & Song, Jinbo, 2018. "Contracting and renegotiating with a loss-averse private firm in BOT road projects," Transportation Research Part B: Methodological, Elsevier, vol. 112(C), pages 40-72.

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