Skip to main content
Open Access Publications from the University of California

UC Berkeley

UC Berkeley Previously Published Works bannerUC Berkeley

Implementing the first best in an agency relationship with renegotiation: A corrigendum


The proof in Proposition 4 in Hermalin and Katz (1991) is incorrect because it fails to check post-renegotiation utilities against the incentive compatibility constraints. This note states and proves a comparable proposition witha slightly stronger assumption regarding the monotonicity of bargaining. This result vindicates the central intuition of Hermalin and Katz about the potential insignificance of the observable, but unverifiable distinction in contracting.

Many UC-authored scholarly publications are freely available on this site because of the UC's open access policies. Let us know how this access is important for you.

Main Content
For improved accessibility of PDF content, download the file to your device.
Current View