Laffont, Jean-Jacques; Tirole, Jean - In: Review of Economic Studies 57 (1990) 4, pp. 597-625
As was shown by M. Dewatripont (1986), 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...