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Definable and Contractible Contracts

  • Peters, Michael
  • Szentes, Balazs

This paper analyzes Bayesian normal form games in which players write contracts that condition their actions on the contracts of the other players. These contracts are required to be representable in a formal language. This is accomplished by constructing contracts which are definable functions of the Godel code of every other player's contract. We provide a complete characterization of the set of allocations supportable as pure strategy Bayesian equilibrium of this contracting game. When information is complete, this characterization provides a folk theorem. In general, the set of supportable allocations is smaller than the set supportable by a centralized mechanism designer.

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File URL: http://montoya.econ.ubc.ca/mike/folk_theorem.pdf
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Paper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number michael_peters-2009-7.

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Length: 0 pages
Date of creation: 22 Jan 2009
Date of revision: 13 May 2010
Handle: RePEc:ubc:pmicro:michael_peters-2009-7
Contact details of provider: Web page: http://www.economics.ubc.ca/

References listed on IDEAS
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  1. Takuro Yamashita, 2010. "Mechanism Games With Multiple Principals and Three or More Agents," Econometrica, Econometric Society, vol. 78(2), pages 791-801, 03.
  2. Roger B. Myerson, 1981. "Mechanism Design by an Informed Principal," Discussion Papers 481, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Peters, Michael & Troncoso-Valverde, Cristián, 2013. "A folk theorem for competing mechanisms," Journal of Economic Theory, Elsevier, vol. 148(3), pages 953-973.
  4. Martimort, David & Moreira, Humberto, 2010. "Common agency and public good provision under asymmetric information," Theoretical Economics, Econometric Society, vol. 5(2), May.
  5. Michael L. Katz, 2006. "Observable Contracts as Commitments: Interdependent Contracts and Moral Hazard," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(3), pages 685-706, 09.
  6. Larry Epstein & Michael Peters, 1996. "A Revelation Principle For Competing Mechanisms," Working Papers peters-96-02, University of Toronto, Department of Economics.
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