Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/190569
Authors: 
Gretschko, Vitali
Wambach, Achim
Year of Publication: 
2018
Series/Report no.: 
ZEW Discussion Papers No. 18-054
Abstract: 
We consider the problem of a principal who wishes to contract with a privately informed agent and is not able to commit to not renegotiating any mechanism. That is, we allow the principal, after observing the outcome of a mechanism to renegotiate the resulting contract without cost by proposing a new mechanism any number of times. We provide a general characterization of renegotiation-proof states of such a renegotiation. The proposed solution concept provides an effective and easy-to-use tool to analyze contracting problems with limited commitment. We apply the solution concept to a setting with a continuous type space, private values and non-linear contracts. We find that the optimal contracts for the principal are pooling and satisfy a "no-distortionat-the-bottom" property.
Subjects: 
Principal-Agent models
renegotiation
commitment
Coase-conjecture
JEL: 
C72
C73
C78
D82
Document Type: 
Working Paper

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