Posterior renegotiation-proofness in a two-person decision problem

Kei Kawakami

International Journal of Game Theory, 2016, vol. 45, issue 4, No 7, 893-931

Abstract: Abstract When two agents with private information use a mechanism to determine an outcome, what happens if they are free to revise their messages and cannot commit to a mechanism? We study this problem by allowing agents to hold on to a proposed outcome in one mechanism while they play another mechanism and learn new information. A decision rule is posterior renegotiation-proof if it is posterior implementable and robust to a posterior proposal of any posterior implementable decision rule. We identify conditions under which such decision rules exist. We also show how the inability to commit to the mechanism constrains equilibrium: a posterior renegotiation-proof decision rule must be implemented with at most five messages for two agents.

Keywords: Information aggregation; Limited commitment; Posterior efficiency; Posterior implementation; Renegotiation-proofness (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00182-015-0491-9

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