Forthcoming in Econometrica IMPLEMENTING THE FIRST BEST IN AN AGENCY RELATIONSHIP WITH RENEGOTIATION: A CORRIGENDUM1 by
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چکیده
Abstract: The proof of Proposition 4 in Hermalin and Katz (1991) is incorrect, because it fails to check post-renegotiation utilities against the incentive compatibility constraints. This note states and proves a comparable proposition with a slightly stronger assumption regarding the monotonicity of bargaining. This result vindicates the central intuition of Hermalin and Katz about the potential insigni...cance of the observable, but unveri...able distinction in contracting.
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Forthcoming in Econometrica IMPLEMENTING THE FIRST BEST IN AN AGENCY RELATIONSHIP WITH RENEGOTIATION: A CORRIGENDUM1
Abstract: The proof of Proposition 4 in Hermalin and Katz (1991) is incorrect, because it fails to check post-renegotiation utilities against the incentive compatibility constraints. This note states and proves a comparable proposition with a slightly stronger assumption regarding the monotonicity of bargaining. This result vindicates the central intuition of Hermalin and Katz about the potenti...
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