Unforeseen Contingency and Renegotiation with Asymmetric Information
This article considers a buyer-seller contracting model in which the seller possesses private information about all relevant aspects of the state of nature, including how much each action is worth to the buyer. I argue that, given asymmetric information, the buyer may not entirely dismiss an unforeseen contingency claim by the seller. Then, if the buyer lacks the foresight/awareness to 'expect the unexpected', the model admits an equilibrium in which a seemingly complete contract is written and then renegotiated along its outcome path to generate inefficiency "ex post". Copyright © 2008 The Author(s).
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 118 (2008)
Issue (Month): 528 (04)
|Contact details of provider:|| Postal: Office of the Secretary-General, Rm E35, The Bute Building, Westburn Lane, St Andrews, KY16 9TS, UK|
Phone: +44 1334 462479
Web page: http://www.res.org.uk/
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishers.co.uk/asp/journal.asp?ref=0013-0133|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oliver Hart & John Moore, 1998.
"Foundations of incomplete contracts,"
LSE Research Online Documents on Economics
19354, London School of Economics and Political Science, LSE Library.
- Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," NBER Working Papers 6726, National Bureau of Economic Research, Inc.
- Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1846, Harvard - Institute of Economic Research.
- John Geanakoplos, 1989. "Game Theory Without Partitions, and Applications to Speculation and Consensus," Cowles Foundation Discussion Papers 914, Cowles Foundation for Research in Economics, Yale University.
- Eric Maskin & John Moore, 1999.
"Implementation and Renegotiation,"
Harvard Institute of Economic Research Working Papers
1863, Harvard - Institute of Economic Research.
- David Ettinger & Philippe Jehiel, 2004.
"Towards a Theory of Deception,"
122247000000000247, UCLA Department of Economics.
- Philippe Jehiel & David Ettinger, 2005. "Towards a theory of deception," PSE Working Papers halshs-00590767, HAL.
- David Ettinger & Philippe Jehiel, 2006. "Towards a Theory of Deception," Levine's Bibliography 122247000000000775, UCLA Department of Economics.
- Philippe Jehiel & David Ettinger, 2007. "Towards a Theory of Deception," Levine's Bibliography 843644000000000126, UCLA Department of Economics.
- Eyster, Erik & Rabin, Matt, 2002.
Department of Economics, Working Paper Series
qt6xf4782t, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Eyster, Erik & Rabin, Matthew, 2002. "Cursed Equilibrium," Department of Economics, Working Paper Series qt7p2911dn, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Erik Eyster & Matt Rabin, 2003. "Cursed Equilibrium," Method and Hist of Econ Thought 0303002, EconWPA.
- repec:ebl:ecbull:v:3:y:2005:i:5:p:1-7 is not listed on IDEAS
- Donald B. Hausch & Yeon-Koo Che, 1999.
"Cooperative Investments and the Value of Contracting,"
American Economic Review,
American Economic Association, vol. 89(1), pages 125-147, March.
- Che, Y.K. & Hausch, D.B., 1997. "Cooperative Investments and the Value of Contracting," Working papers 9714, Wisconsin Madison - Social Systems.
- Barton L. Lipman, 1993.
"Information Processing and Bounded Rationality: A Survey,"
872, Queen's University, Department of Economics.
- Barton L. Lipman, 1995. "Information Processing and Bounded Rationality: A Survey," Canadian Journal of Economics, Canadian Economics Association, vol. 28(1), pages 42-67, February.
- Geanakoplos & Adam Brandenburger & Eddie Dekel, 1988.
"Correlated Equilibrium with Generalized Information Structures,"
Cowles Foundation Discussion Papers
884R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1989.
- Brandenburger, Adam & Dekel, Eddie & Geanakoplos, John, 1992. "Correlated equilibrium with generalized information structures," Games and Economic Behavior, Elsevier, vol. 4(2), pages 182-201, April.
- Ted O'Donoghue & Matthew Rabin, 1997.
"Incentives for Procrastinators,"
1181, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Crawford, Vincent P., 2001.
"Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions,"
University of California at San Diego, Economics Working Paper Series
qt6k65014s, Department of Economics, UC San Diego.
- Vincent P. Crawford, 2003. "Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions," American Economic Review, American Economic Association, vol. 93(1), pages 133-149, March.
- Malmendier, Ulrike M. & Della Vigna, Stefano, 2003.
"Contract Design and Self Control: Theory and Evidence,"
1801, Stanford University, Graduate School of Business.
- Stefano DellaVigna & Ulrike Malmendier, 2004. "Contract Design and Self-Control: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 353-402.
When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:118:y:2008:i:528:p:678-694. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.