Mediated Renegotiation

Andrea Attar, Lorenzo Bozzoli and Roland Strausz

No 24-1522, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We propose a novel approach to contract renegotiation with asymmetric information, introducing mediated mechanisms that generate additional private information to deter renegotiation. These mechanisms prevent any renegotiation, upholding secondbest optimality as the unique equilibrium outcome. Thus, the inefficiencies typically associated with the threat of renegotiation are completely offset by the design of mediated mechanisms. We formally illustrate this result in the canonical framework of Fudenberg and Tirole (1990). We explicitly show that these mediated mechanisms can be decentralized by smart contracts, running on a public blockchain, which guarantees that our results do not require any trustworthy third party.

JEL-codes: D43 D82 D86 (search for similar items in EconPapers)
Date: 2024-03, Revised 2025-02
New Economics Papers: this item is included in nep-cta, nep-gth, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.tse-fr.eu/sites/default/files/TSE/docu ... 2024/wp_tse_1522.pdf Full Text (application/pdf)

Related works:
Working Paper: Mediated Renegotiation (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:129278

Access Statistics for this paper

More papers in TSE Working Papers from Toulouse School of Economics (TSE) Contact information at EDIRC.
Bibliographic data for series maintained by ().