All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC

Jihong Lee
''Incomplete Information, Renegotiation, and Breach of Contract''
( 2005, Vol. 3 No.5 )
Once a contract has been agreed by two agents, the problem of renegotiating breach under two-sided asymmetric information on the agents' outside options is equivalent to the problem of bilateral trade with uncertain gains. Thus, the theorem of Myerson and Satterthwaite (1983) implies the impossibility of efficient renegotiation. We also show that, assuming no renegotiation, the optimal breach mechanism in this setting corresponds to the expectation damage rule.
Keywords: Contract Breach
K4 - Legal Procedure, the Legal System, and Illegal Behavior: General
Manuscript Received : Nov 01 2004 Manuscript Accepted : Jan 22 2005

  This abstract has been downloaded 2056 times                The Full PDF of this paper has been downloaded 154664 times