Contract renegotiation with time-varying valuations

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3 Scopus citations

Abstract

The paper characterizes optimal renegotiation-proof rental contracts in a model with adverse selection and hidden information. It generalizes the work of Hart and Tirole (1988) to the case of time-varying valuations. The paper considers a durable-goods monopolist who serves a nonanonymous buyer with time-varying valuation for the seller's good. The buyer's valuation has a persistent and a transient component; both are private information. The paper shows that for some range of prior beliefs the seller strictly prefers leasing to selling.

Original languageEnglish (US)
Pages (from-to)397-433
Number of pages37
JournalJournal of Economics and Management Strategy
Volume7
Issue number3
DOIs
StatePublished - Jan 1 1998

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ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

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