Subgame Perfect Implementation with Almost Perfect Information

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.

[1]  D. Fudenberg,et al.  Rational Behavior with Payoff Uncertainty , 1990 .

[2]  E.E.C. van Damme,et al.  Games with imperfectly observable commitment , 1997 .

[3]  Sanford J. Grossman,et al.  The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration , 1986 .

[4]  Eric Maskin,et al.  Two Remarks on the Property-Rights Literature , 1999 .

[5]  John. Moore,et al.  Subgame Perfect Implementation , 1988 .

[6]  R. Gibbons,et al.  Cheap Talk Can Matter in Bargaining , 1988 .

[7]  R. Zeckhauser,et al.  Efficiency Despite Mutually Payoff-Relevant Private Information: The Finite Case , 1990 .

[8]  J. Laffont,et al.  Implementation, Contracts, and Renegotiation in Environments With Complete Information , 1992 .

[9]  Eric Maskin,et al.  Unforeseen Contingencies and Incomplete Contracts , 1999 .

[10]  Richard P. McLean,et al.  FULL EXTRACTION OF THE SURPLUS IN BAYESIAN AND DOMINANT STRATEGY AUCTIONS , 1988 .

[11]  R. Myerson.  Two-Person Bargaining Problems with Incomplete Information , 1982 .

[12]  N. Meyers,et al.  H = W. , 1964, Proceedings of the National Academy of Sciences of the United States of America.

[13]  Dieter Bös,et al.  Property rights and the nature of the firm journal of political economy: Oliver Hart and John Moore, Journal of political economy (1990), no. 6, 1119-1158 , 1991 .

[14]  O. Hart,et al.  Property Rights and the Nature of the Firm , 1988, Journal of Political Economy.

[15]  E. Maskin.  Nash Equilibrium and Welfare Optimality , 1999 .

[16]  Yeon-Koo Che,et al.  Cooperative Investments and the Value of Contracting , 1999 .

[17]  Tilman Börgers,et al.  Weak Dominance and Approximate Common Knowledge , 1994 .

[18]  D. Monderer,et al.  Approximating common knowledge with common beliefs , 1989 .

[19]  Philippe Aghion,et al.  RENEGOTIATION DESIGN WITH UNVERIFIABLE INFORMATION , 1994 .

[20]  Muhamet Yildiz,et al.  A Structure Theorem for Rationalizability with Application to Robust Predictions of Refinements , 2007 .

[21]  David M. Kreps,et al.  On the Robustness of Equilibrium Refinements , 1988 .