Working paper

Mediated Renegotiation

Andrea Attar, Lorenzo Bozzoli, and Roland Strausz


We develop a new approach to contract renegotiation under informational frictions. Specically, we consider mediated mechanisms which cannot be contingent on any subsequent offer, but can generate a new source of asymmetric information between the contracting parties. Taking as a reference the canonical framework of Fudenberg and Tirole (1990), we show that, if mediated mechanisms are allowed, the corresponding renegotiation game admits only one equilibrium allocation, which coincides with the second-best one. Thus, the inefficiencies typically associated to the threat of renegotiation may be completely offset by the design of more sophisticated trading mechanisms.

JEL codes

  • D43: Oligopoly and Other Forms of Market Imperfection
  • D82: Asymmetric and Private Information • Mechanism Design
  • D86: Economics of Contract: Theory


Andrea Attar, Lorenzo Bozzoli, and Roland Strausz, Mediated Renegotiation, TSE Working Paper, n. 24-1522, March 2024.

See also

Published in

TSE Working Paper, n. 24-1522, March 2024