Instituto de Economía

Abstract: I consider the interaction between an agent and a principal who is unable to
commit not to renegotiate. The agent’s type only a¤ects the principal’s utility.
The principal has access to a public signal, correlated with the agent’s type, which
can be used to (imperfectly) verify the agent’s report. I de…ne renegotiation proof
mechanisms and characterize the optimal one: there is pooling on top – types
above a threshold report to be the largest type, while types below the threshold
report truthfully – and no regret on top – the mechanism is sequentially optimal
after the agent reports to be the largest type.