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Renegotiation-Proof Relational Contracts with Side Payments

Sebastian Kranz () and Susanne Ohlendorf
Authors registered in the RePEc Author Service: Susanne Goldlücke

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We study infinitely repeated two player games with perfect information, where each period consists of two stages: one in which the parties simultaneously choose an action and one in which they can transfer money to each other. We first derive simple conditions that allow a constructive characterization of all Pareto-optimal subgame perfect payoffs for all discount factors. Afterwards, we examine different concepts of renegotiation-proofness and extend the characterization to renegotiation-proof payoffs.

Keywords: renegotiation; infinitely repeated games; side payments; optimal penal codes (search for similar items in EconPapers)
JEL-codes: C73 L14 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-gth
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