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On Watson’s Non-Forcing Contracts and Renegotiation

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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Paper provided by Brown University, Department of Economics in its series Working Papers with number 2004-03.

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Date of creation: 2004
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Handle: RePEc:bro:econwp:2004-03
Contact details of provider: Postal: Department of Economics, Brown University, Providence, RI 02912

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  1. Roberto Serrano & Antonio Cabrales, 2007. "Implementation in Adaptive Better-Response Dynamics," Working Papers 2007-10, Brown University, Department of Economics.
  2. 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.
  3. Robert J. Aumann & Roberto Serrano, 2006. "An Economic Index of Riskiness," Working Papers 2006-20, Brown University, Department of Economics.
  4. Max Bruche & Javier Suarez, 2009. "The Macroeconomics Of Money Market Freezes," Working Papers wp2009_0901, CEMFI.
  5. Enrique Sentana, 2008. "The Econometrics Of Mean-Variance Efficiency Tests: A Survey," Working Papers wp2008_0807, CEMFI.
  6. Max Bruche, 2009. "Bankruptcy Codes, Liquidation Timing, And Debt Valuation," Working Papers wp2009_0902, CEMFI.
  7. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2008. "Does immigration affect the Phillips curve? Some evidence for Spain," Banco de Espa�a Working Papers 0814, Banco de Espa�a.
  8. Javier Mencía & Enrique Sentana, 2009. "Multivariate location-scale mixtures of normals and mean-variance-skewness portfolio allocation," Banco de Espa�a Working Papers 0909, Banco de Espa�a.
  9. Segal, Ilya, 1999. "Complexity and Renegotiation: A Foundation for Incomplete Contracts," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 57-82, January.
  10. Enrique Moral-Benito, 2010. "Determinants of economic growth: A Bayesian panel data approach," Banco de Espa�a Working Papers 1031, Banco de Espa�a.
  11. Roberto Serrano & Allan M. Feldman, 2007. "Arrow’S Impossibility Theorem: Preference Diversity In A Single-Profile World," Working Papers wp2007_0710, CEMFI.
  12. Eric Maskin & John Moore, 1998. "Implementation and renegotiation," LSE Research Online Documents on Economics 19350, London School of Economics and Political Science, LSE Library.
  13. Rafael Repullo & David Martínez-Miera, 2008. "Does Competition Reduce The Risk Of Bank Failure?," Working Papers wp2008_0801, CEMFI.
  14. Javier Mencía & Enrique Sentana, 2009. "Distributional tests in multivariate dynamic models with Normal and Student t innovations," Banco de Espa�a Working Papers 0929, Banco de Espa�a.
  15. Rene Saran & Roberto Serrano, 2007. "The Evolution of Bidding Behavior in Private-Values Auction and Double Auctions," Working Papers 2007-01, Brown University, Department of Economics.
  16. Joel Watson, 2002. "Contract, Mechanism Design, and Technological Detail," Theory workshop papers 505798000000000006, UCLA Department of Economics.
  17. Victor Aguirregabiria & Pedro mira, 2007. "Dynamic Discrete Choice Structural Models: A Survey," Working Papers tecipa-297, University of Toronto, Department of Economics.
  18. Roberto Serrano, 2007. "Cooperative Games: Core and Shapley Value," Working Papers 2007-11, Brown University, Department of Economics.
  19. Enrique Sentana & Gabriele Fiorentini, 2007. "On The Efficiency And Consistency Of Likelihood Estimation In Multivariate Conditionally Heteroskedastic Dynamic Regression Models," Working Papers wp2007_0713, CEMFI.
  20. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July.
  21. Gerard Llobet & Anna Layne-Farrar & A. Jorge Padilla, 2008. "Are Joint Negotiations In Standard Stting "Reasonably Necessary"?," Working Papers wp2008_0808, CEMFI.
  22. Repullo, Rafael & Saurina, Jesús & Trucharte, Carlos, 2009. "Mitigating the Procyclicality of Basel II," CEPR Discussion Papers 7382, C.E.P.R. Discussion Papers.
  23. Manuel Arellano & Lars Peter Hansen & Enrique Sentana, 2009. "Underidentification?," CeMMAP working papers CWP24/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  24. Repullo, Rafael & Suarez, Javier, 2008. "The Procyclical Effects of Basel II," CEPR Discussion Papers 6862, C.E.P.R. Discussion Papers.
  25. Gagliarducci, Stefano & Nannicini, Tommaso & Naticchioni, Paolo, 2008. "Electoral Rules and Politicians’ Behavior: A Micro Test," IZA Discussion Papers 3348, Institute for the Study of Labor (IZA).
  26. L. Hospido, 2012. "Modelling heterogeneity and dynamics in the volatility of individual wages," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(3), pages 386-414, 04.
  27. Enrique Sentana & Dante Amegual, 2008. "A Comparison Of Mean-Variance Efficiency Tests," Working Papers wp2008_0806, CEMFI.
  28. repec:att:wimass:9714 is not listed on IDEAS
  29. Ilya Segal & Michael D. Whinston, 2002. "The Mirrlees Approach to Mechanism Design with Renegotiation (with Applications to Hold-up and Risk Sharing)," Econometrica, Econometric Society, vol. 70(1), pages 1-45, January.
  30. 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.
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