Subgame Perfect Implementation with Almost Perfect Information

39 Pages Posted: 11 Jan 2008

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Drew Fudenberg

Massachusetts Institute of Technology (MIT)

Richard Holden

Massachusetts Institute of Technology (MIT); National Bureau of Economic Research (NBER)

Date Written: January 2008

Abstract

The theory of incomplete contracts has been recently questioned using or extending the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of this mechanism to the introduction of small amounts of asymmetric information. Our main result is that the mechanism may not yield (even approximately) truthful revelation as the amount of asymmetric information goes to zero.

Suggested Citation

Aghion, Philippe and Fudenberg, Drew and Holden, Richard, Subgame Perfect Implementation with Almost Perfect Information (January 2008). Harvard Institute of Economic Research Discussion Paper No. 2150. Available at SSRN: https://ssrn.com/abstract=1081588 or http://dx.doi.org/10.2139/ssrn.1081588

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Drew Fudenberg (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Richard Holden

Massachusetts Institute of Technology (MIT) ( email )

E52-410
50 Memorial Drive
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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