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On Watson’s Non-Forcing Contracts and Renegotiation

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Watson (2007) 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 nonforcing 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 CEMFI in its series Working Papers with number wp2009_0907.

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Date of creation: Sep 2009
Handle: RePEc:cmf:wpaper:wp2009_0907
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  1. Cabrales, Antonio & Serrano, Roberto, 2007. "Implementation in adaptive better-response dynamics," UC3M Working papers. Economics we075731, Universidad Carlos III de Madrid. Departamento de Economía.
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  3. Hospido, Laura, 2010. "Modelling Heterogeneity and Dynamics in the Volatility of Individual Wages," IZA Discussion Papers 4712, Institute for the Study of Labor (IZA).
  4. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F., 2008. "Does immigration affect the Phillips curve? Some evidence for Spain," European Economic Review, Elsevier, vol. 52(8), pages 1398-1423, November.
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  6. Eric Maskin & John Moore, 1999. "Implementation and Renegotiation," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 39-56.
  7. Ildefonso Mendez, 2013. "Promoting permanent employment: lessons from Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(2), pages 175-199, June.
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  9. Robert J. Aumann & Roberto Serrano, 2006. "An Economic Index of Riskiness," Levine's Bibliography 321307000000000585, UCLA Department of Economics.
  10. Amengual, Dante & Sentana, Enrique, 2010. "A comparison of mean-variance efficiency tests," Journal of Econometrics, Elsevier, vol. 154(1), pages 16-34, January.
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  12. Rafael Repullo & Jesús Saurina & Carlos Trucharte, 2009. "Mitigating the Procyclicality of Basel II," Working Papers wp2009_0903, CEMFI.
  13. Victor Aguirregabiria & Pedro mira, 2007. "Dynamic Discrete Choice Structural Models: A Survey," Working Papers tecipa-297, University of Toronto, Department of Economics.
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  15. Manuel Arellano & Lars Peter Hansen & Enrique Sentana, 2009. "Underidentification? (Resumen)," Working Papers wp2009_0905, CEMFI.
  16. Watson, Joel, 2006. "Contract, Mechanism Design, and Technological Detail," University of California at San Diego, Economics Working Paper Series qt2m08n7cg, Department of Economics, UC San Diego.
  17. 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.
  18. Enrique Sentana, 2009. "The econometrics of mean-variance efficiency tests: a survey," Econometrics Journal, Royal Economic Society, vol. 12(3), pages 65-101, November.
  19. repec:cmf:wpaper:wp2008_0808 is not listed on IDEAS
  20. 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).
  21. 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.
  22. Max Bruche, 2009. "Bankruptcy Codes, Liquidation Timing, and Debt Valuation," Working Papers wp2009_0902, CEMFI.
  23. Enrique Moral-Benito, 2012. "Determinants of Economic Growth: A Bayesian Panel Data Approach," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 566-579, May.
  24. Max Bruche & Javier Suarez, 2009. "The Macroeconomics of Money Market Freezes," Working Papers wp2009_0901, CEMFI.
  25. Javier Mencía & Enrique Sentana, 2009. "Multivariate location-scale mixtures of normals and mean-variance-skewness portfolio allocation," Working Papers 0909, Banco de España;Working Papers Homepage.
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  27. Roberto Serrano, 2007. "Cooperative Games: Core and Shapley Value," Working Papers 2007-11, Brown University, Department of Economics.
  28. Hardman Moore, John & Hart, Oliver, 1985. "Incomplete Contracts and Renegotiation," CEPR Discussion Papers 60, C.E.P.R. Discussion Papers.
  29. Ilya Segal, 1999. "Complexity and Renegotiation: A Foundation for Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 57-82.
  30. Javier Mencía & Enrique Sentana, 2009. "Distributional tests in multivariate dynamic models with Normal and Student t innovations," Working Papers 0929, Banco de España;Working Papers Homepage.
  31. repec:cmf:wpaper:wp2007_0712 is not listed on IDEAS
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