Contractual incompleteness in an extensive-form game under perfect information using Stackelberg model
Keywords:The Augmented model, Contractual commitments, Revenue acceleration, Standard debt contracts, Repeated games,
AbstractThe paper presents the explanation of contractual commitments which are renegotiation-proof, based on “strategic default”. Under this, financial contracts must provide incentives of their own so that the parties would honor the agreement. We investigates the reach of this type of commitment within the general class of extensive form games. The result is that a renegotiation-proof contract exists which commits against every deviation from the equilibrium which would induce a revenue acceleration. AMS Subj. Classification: 91A40, 91A20 .
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