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Renegotiation-Proof Mechanism Design

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  • Neeman, Zvika
  • Pavlov, Gregory

Abstract

A mechanism is said to be renegotiation-proof if it is robust against renegotation both before and after it is played. We ask the following three related questions: (1) what kind of environments or mechanism design problems admit renegotiation-proof implementation? (2) what kind of social choice rules are implementable in a way that is renegotiation-proof? and (3) what kind of mechanisms are renegotiation-proof? We provide characterization results for environments, social choice rules, and mechanisms that facilitate renegotiation-proof implementation in complete information settings, and in incomplete information settings with independent private values. For incomplete information settings with correlated interdependent values we provide sufficient conditions for renegotiation-proof implementation. Importantly, our results imply that some common mechanism design problems do not admit the existence of any renegotiation-proof mechanism.

Suggested Citation

  • Neeman, Zvika & Pavlov, Gregory, 2008. "Renegotiation-Proof Mechanism Design," Foerder Institute for Economic Research Working Papers 275717, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275717
    DOI: 10.22004/ag.econ.275717
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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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