|Achim Wambach, University of Munich|
|Renegotiation Before Contract Execution|
|Session: C-13-4 Wednesday 16 August 2000 by Wambach, Achim|
|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 generalised 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.
|Submitted paper full-text in .pdf|