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On Watson's Non-Forcing Contracts and Renegotiation

Listed author(s):
  • Roberto Serrano

    ()

    (Brown University)

Watson (2007) proposes non-forcing contracts as a way to show the limitations of the mechanism design program with ex-post renegotia- tion (Maskin and Moore (1999)). If one takes a partial implementation approach, as Watson does, we show that non-forcing contracts do not con- stitute an intermediate paradigm between implementation with no renego- tiation and with ex-post renegotiation. Moreover, taking a full implemen- tation approach, non-forcing contracts fail if and only if one goes outside of the constraints identified by Maskin and Moore, because of the appearance of undesirable equilibria.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P80.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 3 ()
Pages: 2350-2360

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Handle: RePEc:ebl:ecbull:eb-09-00450
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  12. Edlin, Aaron S & Reichelstein, Stefan, 1996. "Holdups, Standard Breach Remedies, and Optimal Investment," American Economic Review, American Economic Association, vol. 86(3), pages 478-501, June.
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  14. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
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  17. Javier Mencía & Enrique Sentana, 2009. "Distributional tests in multivariate dynamic models with Normal and Student t innovations," Working Papers 0929, Banco de España;Working Papers Homepage.
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  20. Roberto Serrano & Allan M. Feldman, 2007. "Arrow’S Impossibility Theorem: Preference Diversity In A Single-Profile World," Working Papers wp2007_0710, CEMFI.
  21. Max Bruche, 2009. "Bankruptcy Codes, Liquidation Timing, and Debt Valuation," Working Papers wp2009_0902, CEMFI.
  22. Max Bruche & Javier Suarez, 2009. "The Macroeconomics of Money Market Freezes," Working Papers wp2009_0901, CEMFI.
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  25. Che, Y.K. & Hausch, D.B., 1997. "Cooperative Investments and the Value of Contracting," Working papers 9714, Wisconsin Madison - Social Systems.
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