Relational Contracts: Reputation and Renegotiation

David G. Pearce and Ennio Stacchetti

Journal of Institutional and Theoretical Economics (JITE), 2023, vol. 179, issue 3-4, 562-578

Abstract: This paper outlines some thoughts on relational contracts. Such a contract can involve an implicit agreement to behave in certain ways, that includes the use of explicit, legally enforceable contracts, which may be rewritten as play proceeds. The use of implicit contracts involves a series of challenges not encountered with a legal contract that irrevocably specifies all contingent behavior. What agreements are credible? What threatened punishments will withstand efforts to renegotiate? To what extent can a long-run player establish a reputation for a particular kind of behavior? Can information design and Bayesian persuasion usefully be viewed through this lens?

Keywords: relational contracts; repeated games; implicit contracts; reputation; renegotiation; relationalcontracts; repeatedgames; implicitcontracts (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1628/jite-2023-0043

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