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Subgame perfect implementation with almost perfect information and the hold-up problem

Aghion, P.; Fudenberg, D.; Holden, R.T.; (2009) Subgame perfect implementation with almost perfect information and the hold-up problem. (NBER Working Papers 15167). National Bureau of Economic Research: Cambridge, US. Green open access

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Abstract

The foundations of incomplete contracts have been questioned using or extending the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of subgame perfect implementation to the introduction of small amounts of asymmetric information. We show that Moore- Repullo mechanisms may not yield (even approximately) truthful revelation in pure or totally mixed strategies as the amount of asymmetric information goes to zero. Moreover, we argue that a wide class of extensive-form mechanisms are subject to this fragility.

Type: Working / discussion paper
Title: Subgame perfect implementation with almost perfect information and the hold-up problem
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.nber.org/papers/w15167
Language: English
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/17757
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