Renegotiation in repeated games with side-payments

We consider repeated games with side-payments: players have an endowment of wealth in each period in which transfers can be made. We show that if endo wments are large enough and the common discount factor high enough, then a strongly renegotiation-proof-equilibrium (SRP) in the sense of Farrell and Maskin exists. As the discount factor goes to 1, the set of SRP payoffs con verges to the set of efficient, individually rational payoffs. These result s provide a justification for the efficiency principle when agreements are not enforceable. Journal of Economic Literature Classification Numbers: C73 , D23, L14. (C) 2000 Academic Press.