Equilibrium and Renegotiation in Delegation Games

IGIER Working Paper No. 116

18 Pages Posted: 2 May 1998

See all articles by Michele Polo

Michele Polo

Bocconi University - Department of Economics

Piero Tedeschi

Università Cattolica; Catholic University of the Sacred Heart of Milan

Date Written: November 1997

Abstract

We propose a general formal structure for symmetric information delegation games that encompasses many existing economic applications in the fields of oligopoly theory, the theory of the firm, strategic trade policy and international political economy. We prove that all individually rational allocations are implementable in delegation games with non-separable utility. Secondly, we show that contract renegotiation and non-observable contracts have similar effects only in particular cases. We prove that all the equilibria obtained when renegotiation is excluded are implementable as renegotiation proof equilibria, provided that the side transfer technology implies a dead-weight loss increasing in the size of the transfer.

JEL Classification: C72, L22

Suggested Citation

Polo, Michele and Tedeschi, Piero, Equilibrium and Renegotiation in Delegation Games (November 1997). IGIER Working Paper No. 116. Available at SSRN: https://ssrn.com/abstract=82688 or http://dx.doi.org/10.2139/ssrn.82688

Michele Polo (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Piero Tedeschi

Università Cattolica ( email )

United States
+390272342779 (Phone)
+390272342781 (Fax)

Catholic University of the Sacred Heart of Milan

Italy

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