Premium
Contract Negotiation and the Coase Conjecture: A Strategic Foundation for Renegotiation‐Proof Contracts
Author(s) -
Strulovici Bruno
Publication year - 2017
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta13637
Subject(s) - coase theorem , negotiation , foundation (evidence) , economics , law and economics , contract management , conjecture , business , microeconomics , mathematical economics , management , law , transaction cost , mathematics , political science , discrete mathematics
What does contract negotiation look like when some parties hold private information and negotiation frictions are negligible? This paper analyzes this question and provides a foundation for renegotiation‐proof contracts in this environment. The model extends the framework of the Coase conjecture to situations in which the quantity or quality of the good is endogenously determined and to more general environments in which preferences are nonseparable in the traded goods. As frictions become negligible, all equilibria converge to a unique outcome which is separating, efficient, and straightforward to characterize.