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Mediated Renegotiation

Author

Listed:
  • Andrea Attar

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, TSM - Toulouse School of Management Research - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse, CNRS - Centre National de la Recherche Scientifique)

  • Lorenzo Bozzoli

    (Università degli Studi di Roma Tor Vergata [Roma] = University of Rome Tor Vergata)

  • Roland Strausz

    (HU Berlin - Humboldt-Universität zu Berlin = Humboldt University of Berlin = Université Humboldt de Berlin)

Abstract

We develop a new approach to contract renegotiation under informational frictions. Specically, we consider mediated mechanisms which cannot be contingent on any subsequent offer, but can generate a new source of asymmetric information between the contracting parties. Taking as a reference the canonical framework of Fudenberg and Tirole (1990), we show that, if mediated mechanisms are allowed, the corresponding renegotiation game admits only one equilibrium allocation, which coincides with the second-best one. Thus, the inefficiencies typically associated to the threat of renegotiation may be completely offset by the design of more sophisticated trading mechanisms.

Suggested Citation

  • Andrea Attar & Lorenzo Bozzoli & Roland Strausz, 2024. "Mediated Renegotiation," Working Papers hal-04532231, HAL.
    • Handle: RePEc:hal:wpaper:hal-04532231
    Note: View the original document on HAL open archive server: https://hal.science/hal-04532231
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