Self-Revealing Renegotiation

Andrea Attar, Lorenzo Bozzoli and Roland Strausz

No 26-1710, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We revisit the tension between the legal doctrine of renegotiation and economic efficiency. We introduce self-revealing mechanisms that combine bidirectional communication (the agent sends and receives information) with conditional disclosure (communication remains private during renegotiation but becomes verifiable at contract execution). In the canonical Fudenberg and Tirole (1990) framework, we design a self-revealing mechanism that fully mitigates the renegotiation threat by uniquely implementing the second-best allocation. Thus, the construction achieves the full-commitment outcome while satisfying renegotiation-proofness. Our optimal mechanism is structurally simple, and exploits signal disclosures to the agent to construct incentive-compatible off-path punishments, which she activates after observing a renegotiation offer. It verifies standard commitment assumptions by only conditioning decisions on public information, without requiring any third-party enforcement. In practical terms, it can be implemented with existing smart-contract techniques. Our results extend to general settings of renegotiation.

JEL-codes: D43 D82 D86 (search for similar items in EconPapers)
Date: 2026-02
New Economics Papers: this item is included in nep-des and nep-mic
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.tse-fr.eu/sites/default/files/TSE/docu ... 2026/wp_tse_1710.pdf Working Paper (application/pdf)

Related works:
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:131430

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 ().