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Adverse selection and renegotiation in procurement

Laffont, Jean-Jacques and Tirole, Jean (1990) Adverse selection and renegotiation in procurement. Review of Economic Studies, 57 (4). pp. 597-625. ISSN 0034-6527.

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As was shown by Dewatripont, optimal long-term contracts under asymmetric information are generally not time-consistent. This paper fully characterizes the equilibrium of a two-period procurement model with commitment and renegotiation. It also analyzes whether renegotiated long-term contracts yield outcomes resembling those under either unrenegotiated long-term contracts or a sequence of short-term contracts, and links the analysis with the multiple unit durable good monopoly problem.

Item Type:Article
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Additional Information:© 1990 The Review of Economic Studies Ltd. First version received March 1988; final version accepted February 1990 (eds.). Formerly SSWP 665.
Subject Keywords:Cost efficiency, Capital costs, Adverse selection, Two period model, Contract incentives, Social costs, Production costs, Economic theory, Price discrimination, Economic rent
Issue or Number:4
Record Number:CaltechAUTHORS:20171109-151956951
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83119
Deposited By: Jacquelyn Bussone
Deposited On:16 Nov 2017 22:53
Last Modified:03 Oct 2019 19:02

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