A sequential bargaining model of international debt renegotiation

This paper models the renegotiation of an international debt contract. The model is distinguished from and extends the Bulow-Rogoff (1989a) complete-information model in that it uses an incomplete-information sequential setting which more closely approximates the actual bargaining situation facing countries and their creditors. The model allows a focus on the reasons for delays in reaching agreement, highlighting the imporant role played by information in reducing the time taken to reach agreement. It also allows a focus on the acutal process of renegotiation, highlighting the choices faced by and the factors influencing the parties at each step of the bargaining. This contrasts with the instantaneous arrival at agreement by completeinformation models which lack this particular dimension.