When do incomplete contracts matter?

Autor: Xuyuanda Qi, Aristotelis Boukouras, Giulio Trigilia, Kostas Koufopoulos
Rok vydání: 2021
Předmět:
Zdroj: SSRN Electronic Journal.
ISSN: 1556-5068
DOI: 10.2139/ssrn.3800993
Popis: This paper derives conditions under which the introduction of a third-party agent solves the renegotiation-proofness problem of Moore and Repullo (1988)-type mechanisms, without introducing the potential for other agents to collude with the third-party. The key novelties of our mechanism are: (i) the introduction of a third-party agent only off-equilibrium and with some probability; (ii) the fact that both its existence and its identity are unknown to the other agents. We show that under these conditions, which are satisfied in many empirical applications, a hidden third-party agent can restore the implementation of the efficient allocation. If this agent does not observe the state of the world, we provide a sufficient condition for implementation to succeed.
Databáze: OpenAIRE