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Mechanism Design and Non-Cooperative Renegotiation

  • Robert Evans
  • Sonje Reiche
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    We characterize decision rules which are implementable in mechanism design settings when, after the play of a mechanism, the uninformed party can propose a new mechanism to the informed party. The necessary and sufficient conditions are, essentially, that the rule be implementable with commitment, that for each type the decision is at least as high as if there were no mechanism, and that the slope of the decision function is not too high. The direct mechanism which implements such a rule with commitment will also implement it in any equilibrium without commitment, so the standard mechanism is robust to renegotiation.

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    Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1331.

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    Date of creation: 19 Sep 2013
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    Handle: RePEc:cam:camdae:1331
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    1. Vasiliki Skreta, 2000. "Sequentially Optimal Mechanisms," Econometric Society World Congress 2000 Contributed Papers 1521, Econometric Society.
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    3. Jean-Jacques LAFFONT & Jean TIROLE, 1990. "Adverse Selection and Renegotiation in Procurement," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9005, Université de Lausanne, Faculté des HEC, DEEP.
    4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    5. Oliver D. Hart & Jean Tirole, 1987. "Contract Renegotiation and Coasian Dynamics," Working papers 442, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Drew Fudenberg & Jean Tirole, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 50(2), pages 221-247.
    7. Dewatripont, M. & Maskin, E., 1990. "Contract renegotiation in models of asymmetric information," European Economic Review, Elsevier, vol. 34(2-3), pages 311-321, May.
    8. Krishna, Vijay & Morgan, John, 2004. "Contracting for Information under Imperfect Commitment," Competition Policy Center, Working Paper Series qt4010c6w9, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    9. Green, Jerry R & Laffont, Jean-Jacques, 1987. "Posterior Implementability in a Two-Person Decision Problem," Econometrica, Econometric Society, vol. 55(1), pages 69-94, January.
    10. 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.
    11. Lagunoff Roger D., 1995. "Resilient Allocation Rules for Bilateral Trade," Journal of Economic Theory, Elsevier, vol. 66(2), pages 463-487, August.
    12. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
    13. Neeman, Zvika & Pavlov, Gregory, 2013. "Ex post renegotiation-proof mechanism design," Journal of Economic Theory, Elsevier, vol. 148(2), pages 473-501.
    14. Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-75, September.
    15. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-98, July.
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