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Renegotiation-Proof Implementation and Time Preferences

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  • Ariel Rubinstein
  • Asher Wolinsky

Abstract

This paper explores how the requirement that the implementation of contracts be renegotiation-proof affects the set of contracts that can be implemented in a seller-buyer scenario in which the information regarding the agents' valuations is nonverifiable. This paper explicitly adds a time dimension to an implementation problem and introduces a natural criterion of renegotiation-proofness for the case of time-consuming renegotiation. The main insight gained is that the addition of the time dimension enlarges significantly the set of contracts that can be implemented in a renegotiation-proof manner. Copyright 1992 by American Economic Association.
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Suggested Citation

  • Ariel Rubinstein & Asher Wolinsky, 1989. "Renegotiation-Proof Implementation and Time Preferences," Discussion Papers 850, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:850
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    1. Peter Navarro & Bruce C. Petersen & Thomas R. Stauffer, 1981. "A Critical Comparison of Utility-Type Ratemaking Methodologies in Oil Pipeline Regulation," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 392-412, Autumn.
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    3. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    4. Bawa, Vijay S & Sibley, David S, 1980. "Dynamic Behavior of a Firm Subject to Stochastic Regulatory Review," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 627-642, October.
    5. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, pages 519-540.
    6. William J. Baumol, 1971. "Optimal Depreciation Policy: Pricing the Products of Durable Assets," Bell Journal of Economics, The RAND Corporation, vol. 2(2), pages 638-656, Autumn.
    7. Bruce C. Greenwald, 1984. "Rate Base Selection and the Structure of Regulation," RAND Journal of Economics, The RAND Corporation, pages 85-95.
    8. Greenwald, Bruce C, 1980. " Admissible Rate Bases, Fair Rates of Return and the Structure of Regulation," Journal of Finance, American Finance Association, vol. 35(2), pages 359-368, May.
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