Renegotiation design with unverifiable information
AbstractIt has been emphasized that when contracts are incomplete (e.g., because some relevant variables are not verifiable by outsiders), the possibility of contract negotiation may prevent achieving desirable allocations that could be implemented otherwise. The authors analyze a situation where renegotiation is always possible but contracts can influence the renegotiation process; they show that some flexibility in the choice of this process allows to achieve efficiency in a variety of situations, including optimal risk-sharing and investment decisions. Copyright 1994 by The Econometric Society.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/9591.
Date of creation: 1994
Date of revision:
Publication status: Published in: Econometrica (1994) v.62,p.257-282
Other versions of this item:
- Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-82, March.
- Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
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