Citation

Discussion Paper Details

Please find the details for DP2189 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Renegotiation Before Contract Execution

Author(s): Achim Wambach

Publication Date: July 1999

Keyword(s): Coase conjecture, Principal-Agent Models and Renegotiation

Programme Area(s): Industrial Organization

Abstract: By offering or choosing a contract the informed agent might reveal information to the principal which could be used for immediate renegotiation. This is discussed in an axiomatic approach. We show that if, given the revealed information, there exists a contract which is preferred by everyone, the former contract could not have been renegotiation proof. For private values and common values of the ?Spence' type, a generalized Coase conjecture holds: The principal cannot raise her profit by offering inefficient contracts to the agent. Only for common values of the ?Rothschild-Stiglitz' type, inefficient, but pooling, contracts are possible.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2189

Bibliographic Reference

Wambach, A. 1999. 'Renegotiation Before Contract Execution'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2189