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Adverse Selection and Renegotiation in Procurement

Listed author(s):
  • Jean-Jacques Laffont
  • Jean Tirole

As was shown by Dewatripont, optimal long-term contracts under asymmetric information are generally not time-consistent. This paper fully characterizes the equilibrium of a two-period procurement model with commitment and renegotiation. It also analyzes whether renegotiated long-term contracts yield outcomes resembling those under either unrenegotiated long-term contracts or a sequence of short-term contracts, and links the analysis with the multiple unit durable good monopoly problem.

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File URL: http://hdl.handle.net/10.2307/2298088
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Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 57 (1990)
Issue (Month): 4 ()
Pages: 597-625

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Handle: RePEc:oup:restud:v:57:y:1990:i:4:p:597-625.
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