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On Watson’s Non-Forcing Contracts and Renegotiation

Watson (2002) proposes non-forcing contracts as a way to show the limitations of the mechanism design program with ex-post renegotiation (Maskin and Moore (1999)). If one takes a partial implementation approach, as Watson does, we show that non-forcing contracts do not constitute an intermediate paradigm between implementation with no renegotiation and with ex-post renegotiation. Moreover, taking a full implementation 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
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Department of Economics, Brown University, Providence, RI 02912

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