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

Richard Holden, Drew Fudenberg and Philippe Aghion

Scholarly Articles from Harvard University Department of Economics

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.

Date: 2009
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Published in NBER Working Paper Series

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Working Paper: Subgame Perfect Implementation with Almost Perfect Information and the Hold-Up Problem (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3708929

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