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dc.contributor.authorAghion, Philippe
dc.contributor.authorDewatripont, Mathias
dc.contributor.authorRey, Patrick
dc.date.accessioned2014-07-01T14:55:45Z
dc.date.issued1994
dc.identifier.citationAghion, Philippe, Mathias Dewatripont, and Patrick Rey. 1994. “Renegotiation Design with Unverifiable Information.” Econometrica 62 (2) (March): 257.en_US
dc.identifier.issn0012-9682en_US
dc.identifier.urihttp://nrs.harvard.edu/urn-3:HUL.InstRepos:12375014
dc.description.abstractThis paper considers a buyer-seller relationship with observable but unverifiable investments and/or random utility parameters. In such situations, it is known that contract renegotiation may prevent the implementation of first-best outcomes. In this paper, we show however that efficient investments and optimal risk-sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process. Specifically, we focus on the following two features of renegotiation design. First, default options in case renegotiation breaks down; second, the allocation of all bargaining power to either contracting party. Moreover, we show that these two features can be obtained in standard Rubinstein bargaining games through contractual provisions, such as specific-performance clauses and penalties for delay (or, equivalently, financial "hostages" refundable without interest).en_US
dc.description.sponsorshipEconomicsen_US
dc.language.isoen_USen_US
dc.publisherThe Econometric Societyen_US
dc.relation.isversionofdoi:10.2307/2951613en_US
dash.licenseLAA
dc.subjectInvestment; incomplete contracts; renegotiation; unverifiable information; risk-sharing; opportunism; hostagesen_US
dc.titleRenegotiation Design with Unverifiable Informationen_US
dc.typeJournal Articleen_US
dc.description.versionAccepted Manuscripten_US
dc.relation.journalEconometricaen_US
dash.depositing.authorAghion, Philippe
dc.date.available2014-07-01T14:55:45Z
dc.identifier.doi10.2307/2951613*
dash.contributor.affiliatedAghion, Philippe


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