Contract Theory - Topics and articles

    The concepts developed in the articles of this reading list will be discussed in class. Articles marked with * need to be read (as instructed) before attending class. They are available through USC libraries.

  • Modelling contractual relationships: overview of the field

  • Asymmetric information and the uninformed Principal

    • - Baron D.P. and Myerson R.B., ``Regulating a monopolist with unknown costs'', Econometrica 50(4), pp 911-930 (1982).

    - Clarke, E. ``Multipart pricing of public goods.'' , Public Choice}, Vol. 8, pp. 19-33 (1971).

    - * D'Aspremont, C., and G'erard-Varet, L.A. ``Incentives and incomplete information.'' Journal of Public economics, Vol. 11, pp. 25-45 (1979).

    - Groves, T. ``Incentives in teams.'' Econometrica, Vol. 41 , pp. 617-631 (1973).

    - Guesnerie R. and J.J. Laffont, ``A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm’’, Journal of Public Economics, 25, 329-69 (1984)

    - Jullien B., ``Participation constraints in adverse selection models’’, Journal of Economic Theory, 93, 1-47 (2000)

    - Laffont J.J. and J. Tirole, ``Using cost observation to regulate firms’’, Journal of Political Economy, 94, 614-41 (1986).

    - Lewis T. and D. Sappington, ``Countervailing incentives in agency problems’’, Journal of Economic Theory, 49, 294-313 (1989)

    - Maggi, G., and Rodriguez, A. ``On countervailing incentives.'' , Journal of Economic Theory, Vol. 66, pp. 238-263 (1995).

    - Martimort D. and Semenov A., ``Continuity in mechanism design without transfers'', Economics Letters, 93, 182-189 (2006).

    - * Myerson R.B., ''Optimal auction design'', Mathematics of Operations Research, 6(1), pp 58-73 (1981)

    - Myerson R. and M. Satterthwaite, ``Efficient mechanisms for bilateral trading’’, Journal of Economic Theory, 28, 265-81 (1983)

  • Moral Hazard

    • - * Holmstrom B., ‘’Moral hazard and observability’’ Bell Journal of Economics, 10(1), 74-91 (1979)

    - * Holmstrom B., ‘’Moral hazard in teams’’ Bell Journal of Economics, 13(2), 324-40 (1982)

    - Holmstrom B., ``Managerial incentive problems: a dynamic perspective’’, Review of Economic Studies, 66, 169-182 (1999)

    - Grossman S.J and Hart O.D., ``An analysis of the Principal-Agent problem'', Econometrica, 51, 7-45 (1983)

  • Asymmetric information and the informed Principal

    • - Akerlof G, ``The market for lemons: quality and the market mechanism’’, Quarterly Journal of Economics, 89, 488-500 (1970)

    - Crawford V. and J. Sobel, ``Strategic information transmission’’, Econometrica, 50, 1431-51 (1982)

    - * Jullien B. and Mariotti T., ``Auction and the informed seller problem’’, Games and Economic Behavior, 56, 225-258 (2006)

    - Mailath G.J., "Incentive compatibility in signaling games with a continuun of types", Econometrica, 55, 1349-1365 (1987)

    - Maskin E. and J. Tirole, ``The principal-agent relationship with an informed principal. I: Private values’’, Econometrica, 58, 379-409 (1990)

    - Maskin E. and J. Tirole, ``The principal-agent relationship with an informed principal. II: Common values’’, Econometrica, 60(1), 1-42 (1992)

    - Spence M., ``Job market signaling’’, Quarterly Journal of Economics, 87, 355-74 (1973)

  • Dynamics

    • - Dewatripont, ``Renegotiation and information revelation over time in optimal labor contracts", Quarterly Journal of Economics (1989)

    - * Laffont and Tirole, ``The dynamics of incentive contracts", Econometrica, 56, 1153-1175 (1988)

    - Laffont and Tirole, ``Adverse selection and renegotiation in Procurement", Review of Economic Studies (1990)

  • Common agency

    • - * Bernheim D. and M. Whinston, ``Common agency’’, Econometrica, 54, 923-42 (1986)

    - Epstein L. G. and Peters M. ``A Revelation Principle for Competing Mechanisms'', Journal of Economic Theory 88, 119-160 (1999)

    - Martimort D. ``Exclusive dealing, common agency, and multiprincipals incentive theory'' Rand Journal of Economics, 27, 1-31 (1996)

    - * Martimort D. and Stole L., The revelation and taxation principles in common agency games'', Econometrica, 70, 1659-73 (2002).

    - Peters M., ``Common agency and the revelation principle'', Econometrica, 69(5), 1349-1372 (2001)

  • Collusion

    • - Kofman and Lawarree, ``Collusion in hierarchical agency", Econometrica (1993).

    - Kofman and Lawarree, ``On the optimality of allowing collusion", Journal of Public Economics, (1996).

    - Laffont J.J. and Martimort D., "Collusion and Delegation", The RAND Journal of Economics, 29(2), 1998, 280-305 (1998)

    - * Laffont J.J. and Martimort D., "Collusion Under Asymmetric Information", Econometrica, vol. 65(4) p. 875-911 (1997)

    - Laffont J.J. and Martimort D., "Mechanism Design with Collusion and Correlation", Econometrica, 68(2), 309-342 (2000)

    - Tirole, ``Hierarchies and bureaucracies: on the role of collusion in organizations", Journal of Law, Economics and Organizations, (1986).

    - Tirole, ``Collusion and the theory of organizations", Advances in Economic Theory, World Congress of the Economic Society, (1992).

  • Incomplete contracts

    • - Maskin, E. and J. Tirole, ``Unforeseen Contingencies and Incomplete Contracts'', Review of Economic Studies, 66, 83-114 (1999).

    - Segal I., ``Complexity and Renegotiation: A Foundation for Incomplete Contracts'', Review of Economic Studies 66(1), 57-82 (1999).

    - Tirole J., ``Incomplete contracts: where do we stand?'' Econometrica, 67(4), 741-781 (1999).

ECON 681

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