This paper studies a two-period principal/agent relationship run by short-term contracts. The principal updates the incentive scheme aft er observing the agent's first-period performance. The agent has superio r information about his ability. The principal offers a first-period incentive scheme...

It has been emphasized that when contracts are incomplete (e.g., because some relevant variables are not verifiable by outsiders), the possibility of contract negotiation may prevent achieving desirable allocations that could be implemented otherwise. The authors analyze a situation where...

Spot contracting generally involves efficiency losses relative to long-term contracting. It is proved here that short-term contracting and renegotiation allow to achieve long-run efficiency when transfers are not limited, objectives are conflicting, and no relevant asymmetric information appears...

The authors show in this paper that renegotiable short-term contracts can be as efficient as long-term renegotiation-proof contracts even in situations of asymmetric information. They do so by extending their earlier results on symmetric information models. Some limited commitment thus seems to...

When a decision rule is implemented using a Bayesian incentive compatible mechanism in which the messages are publically obser vable, the players' information is augmented by their observation of each others' strategies. In this paper the authors study the set of Bayesian implementable decision...

When applied to groups, the revelation principle postulates a Bayesian-Nash behavior between agents. Their binding agreements are unenforceable or the principal can prevent them at no cost. The authors analyze instead a mechanism design problem in which the agents can communicate between...