This paper considers social contracts (or mechanisms) in negotiations with incomplete information in which an outside option is a probabilistic conflict and a peaceful agreement is ex ante efficient. I compute the set of interim incentive efficient mechanisms, the ex ante incentive efficient mechanism, as well as the neutral bargaining solution. I numerically illustrate that the focus on the ex ante incentive efficient mechanism as the most reasonable prediction is not robust. This paper justifies the neutral bargaining solution as the unique, robust solution among all interim incentive efficient mechanisms.
|Number of pages||14|
|Journal||Global Economic Review|
|Publication status||Published - 2022|
Bibliographical noteFunding Information:
This work was supported by the Yonsei University Future-Leading Research Grants (No. 2019-22-0187, 2020-22-0499). I am deeply grateful to Roger Myerson and Lars Stole for their valuable advice and guidance on this paper. I also thank Dieter Balkenborg for helpful suggestions, and two anonymous reviewers for their comments.
© 2021 Institute of East and West Studies, Yonsei University, Seoul.
All Science Journal Classification (ASJC) codes
- Business and International Management
- Economics, Econometrics and Finance(all)
- Political Science and International Relations