Renegotiation Before Contract Execution
AbstractBy offering or choosing a contract the informed agent might reveal information to the principal which could be used for immediate renegotiation. This is discussed in an axiomatic approach. We show that if, given the revealed information, there exists a contract which is preferred by everyone, the former contract could not have been renegotiation proof. For private values and common values of the 'Spence' type, a generalised Coase Conjecture holds: The principal cannot raise her profit by offering inefficient contracts to the agent. Only for common values of the 'Rothschild-Stiglitz' type, inefficient, but pooling, contracts are possible.
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0775.
Date of creation: 01 Aug 2000
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Other versions of this item:
- Wambach, Achim, 1999. "Renegotiation Before Contract Execution," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2189, C.E.P.R. Discussion Papers.
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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