TY - JOUR
T1 - Optimal risk sharing through renegotiation of simple contracts
AU - Gale, Douglas
N1 - Funding Information:
* Albert Ma and Jacob Glazer made helpful comments on an early draft. Later versions were presented at seminars at Boston University, the London School of Economics, and Princeton University, as well as at the Canadian Economic Theory Meetings in Toronto and the MEDS Summer Workshop at Northwestern University. The participants made numerous helpful comments, as did the JFI editors and an anonymous referee. Financial support from the National Science Foundation is gratefully acknowledged.
Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.
PY - 1991/12
Y1 - 1991/12
N2 - We frequently observe that contracts do not include all of the contingencies that would seem to be necessary for optimal risk sharing between the parties to the contract. One reason may be that the possibility of renegotiation makes the contract more contingent than it appears. A simple contracting problem is used to show how even a simple contract may achieve optimal risk sharing if new information arrives slowly relatively to the speed of renegotiation.
AB - We frequently observe that contracts do not include all of the contingencies that would seem to be necessary for optimal risk sharing between the parties to the contract. One reason may be that the possibility of renegotiation makes the contract more contingent than it appears. A simple contracting problem is used to show how even a simple contract may achieve optimal risk sharing if new information arrives slowly relatively to the speed of renegotiation.
UR - http://www.scopus.com/inward/record.url?scp=38149144978&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=38149144978&partnerID=8YFLogxK
U2 - 10.1016/1042-9573(91)90002-H
DO - 10.1016/1042-9573(91)90002-H
M3 - Article
AN - SCOPUS:38149144978
SN - 1042-9573
VL - 1
SP - 283
EP - 306
JO - Journal of Financial Intermediation
JF - Journal of Financial Intermediation
IS - 4
ER -