Renegotiation design under symmetric information
Philippe Aghion, M. Dewartripont, Philippe Rey · DSpace@MIT (Massachusetts Institute of Technology) · 1989
It has been emphasized that, when some relevant variables are not contractible, the possibility of contract renegotiation may prevent achieving desirable allocations which could be implemented otherwise.We analyze a situation where renegotiation is always possible, but contracts can influence the renegotiation process ; we show that some flexibility in the choice of this process allows to achieve efficiency in a variety of situations, including optimal risk-sharing and investment decisions.