Subgame Perfect Implementation with Almost Perfect Information and the Hold-Up Problem

Philippe Aghion, Drew Fudenberg and Richard Holden ()

No 15167, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The foundations of incomplete contracts have been questioned using or extending the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of subgame perfect implementation to the introduction of small amounts of asymmetric information. We show that Moore- Repullo mechanisms may not yield (even approximately) truthful revelation in pure or totally mixed strategies as the amount of asymmetric information goes to zero. Moreover, we argue that a wide class of extensive-form mechanisms are subject to this fragility.

JEL-codes: C72 C73 D23 L22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-gth
Date: 2009-07
Note: EFG

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