This course discusses topics in contract
theory that are left behind in Contract theory I, namely incomplete
contracts and property rights theory; economics of organization; mechanism
design and auction theory. Contract Theory I is the only prerequisite
for taking Contract theory II (familiarity with basic concepts of Microeconomics
is assumed).
There will be three problem sets (one on
each topic) and a final exam. The problem sets will contribute 30% to
the grade.
General references
1.Hart and Holmstrom.The Theory of Contracts.In
Advances in Economic Theory, Fifth World Congress, ed. by Truman Bewley.
Cambridge University Press, 1987.
2.Mas-Colell,
Whinston and Green. The Microeconomic Theory. Chapters 13,14.
3.Hart.Firms, Contracts and Financial Structure. Oxford
University Press, 1995.
Syllabus
1.Incomplete Contracts and Property Rights.
1,
Sec. 3
3,
Ch. 2-3
J.Tirole
(1999) Incomplete contracts: Where Do We Stand? Econometrica
67(4): 741-781.
S.Grossman
and O.Hart (1986) The costs and benefits of ownership: A theory of
vertical and lateral integration. Journal of Political Economy
94(4): 691-719.
O. Hart and J.Moore (1999) Foundations of Incomplete
Contracts, Review of Economic Studies, Vol. 66, 115-138.
O.Hart
and J.Moore (1988) Incomplete contracts and renegotiations. Econometrica
56(4): 755-786.
O.Hart
and J.Moore (1990) Property rights and the nature of the firm. Journal
of Political Economy 98(6): 1119-1158.
G.Noldeke,
K.Schmidt (1995) Option contracts and renegotiations: A solution to
the hold-up problem. Rand Journal of Economics 26(2): 163-179
Y.K.Che
and D.B.Hausch (1999) Cooperative investments and the value of contracting.
American Economic Review 89(1): 125-147
P.
Bolton and M. Whinston (1993) Incomplete contracts, vertical integration,
and supply assurance. Review of Economic Studies, 60 (1):
121-148.
2.Economics of Organization
A.
Banerjee (1997), A Theory of Misgovernance. Quarterly Journal
of Economics, 112(4), 1289-1332.
J.
Tirole (1986) Hierarchies and Bureaucracies: On the Role of Collusion
in Organizations.Journal
of Law, Economics, and Organization 2:181-214.
A. Dixit, G. Grossman and E. Helpman (1997) Common agency and coordination:
General theory and application to government policymaking. Journal
of Political Economy, 105(4), August, 752-769.
B.
Holmstrom and P. Milgrom (1994) The Firm as an Incentive system. American
Economic Review, 84(4): 972- 91.
P.Aghion
and J. Tirole (1997) Formal and real authority in organizations. Journal
of Political Economy, 105(1): 1-29.
G.
Baker, R. Gibbons and K. Murphy (1999), Informal authority in organizations.
Journal of Law, Economics and Organization, 15 (1) 56-73.
G.
Baker, R. Gibbons and K. Murphy. (2002), Relational Contracts and
the Theory of the Firm. Quarterly Journal of Economics, 117
(1): 39-84.
3.Mechanism Design and Auctions
2,
Ch. 23
P.
Bolton and M. Dewatripont (2001), Introduction to Contract Theory
(manuscript), Chapter 8 (Bilateral Trading and Auctions).
J.J.
Laffont and J. Tirole. (1990) Adverse Selection and Renegotiation
in Procurement. Review of Economic Studies, 57: 597-625.
E.
Maskin and J. Riley (1984), Monopoly with Incomplete Information.
Rand Journal of Economics, 15: 171-96.
R.
Myerson and M. Satterthwaite. (1983) Efficient Mechanisms for Bilateral
Trading. Journal of Economic Theory 29: 265-281.
P.
Cramton, R. Gibbons, and P. Klemperer (1987) Dissolving a Partnership
Efficiently.Econometrica
55: 615-32.
R.
Myerson (1981) Optimal Auction Design. Mathematics of Operations
Research, 6: 58-73.
J.
Bulow and J. Roberts, (1989), The Simple Economics of Optimal Auctions.
Journal of Political Economy, 97(5): 1060-1090.
Laffont, J.-J. and J.
Tirole (1993), A Theory of Procurement and Incentives in Regulation.
Cambridge: MIT Press.
Ausubel, L. 2002. "A
Mechanism Generalizing the Vickrey Auction." Forthcoming in Econometrica.
Ausubel, L. and P. Milgrom,
"Ascending Auctions with Package Bidding," draft, University
of Maryland, 2002.
Jehil, P. and B. Moldovanu.
1999. "Resale Markets and the Assignment of Property Rights."
Review of Economic Studies 66: 971-991.
