《契约理论》课程提纲 聂辉华 Contract Theory Fall 2011 Compulsory for graduates in Major of Business Economics Instructor: Huihua NIE Office hours: by appointment Office: Ming De Main Building Credit hour: 3 Course Meet: 09/19/2011– xx/xx/2012 Room: Ming De Main Building 0304 Thurs.: 6:00– 8:30 pm Final exam date: TBA Course Website （中国经济学堂） Textbook Required: (BD) Bolton, Patrick, and Mathias Dewatripont, 2005, Contract Theory, MA: MIT Press; (Y) 杨瑞龙主编：《企业理论：现代观点》，中国人民大学出版社2005年。 Optional: (MP) Macho-Stadler, Ines and Perez-Castrillo, 2001, An Introduction to the Economics of Information: Incentives and Contracts, New York: Oxford University Press; (LM) Laffont, Jean-Jacques and David Martimort, 2002, The Theory of Incentives, New Jersey: Princeton University Press. Prerequisites This course is aimed to be international-standard. Also, it is an upper stream economics class in microeconomics and institutional economics. I will assume that you fully understand the fundamentals of economics principles, and know advanced microeconomics and middle-level game theory. Course Objectives 1
The aim of this course is to offer the framework of contract theory covering both theoretical models and its applications in markets, firms, not-for-profit organizations and governments. Especially, writing technology of formal economic papers is concerned in selected papers by me. I start by introducing the main theoretical concepts and basic framework. Then I give the fundamental models of moral hazard, adverse selection, and hold up in static and dynamic setting, respectively. If time permits, I will introduce recent developments in contract theory, including collusion, reputation, and relational contracts. Preparing for Class It’s better for you to read the relevant chapter(s) or papers in ahead of the time, which should be great helpful for you understanding the content of lectures. Grading There will have one final exam, a number of homework assignments. The homework assignments include all the review questions corresponding to the chapters that we cover in the lectures. The answers that just simply copy those at the back of the textbook will be scored zero. Grades will be determined as follows: Homework 30% Class Performance 20% Final Exam 50% Policies I don’t accept any excuse for the missing of exams unless you can provide proof of emergency such as serious illness. If you miss the exam for any reason that does not qualify as a proven emergency, you get zero. You can work with your classmates on the homework assignments, but you are not allowed to copy someone else’s work. 2
Course Schedule Note: *is optional. I Introduction References Y MP BD Hart, Oliver, and Bengt Holmstrom, 1987, “The Theory of Contracts”, in T. Bewley (ed.), Advanced in Economic Theory, New York: Cambridge University. Press, , 71-155. II Complete Contracts I: Static Bilateral Contracting (i) Moral Hazard I: Single Task standard model basic model: two types special model: mean-variance approach general model: first-order approach * application: sharecropping contracts, debt financing * References Y MP , BD LM Mirrlees, James, 1999, “Theory of Moral Hazard and Unobservable Behavior: Part I”, Review of Economic Studies, 66: 3-22. Holmstrom, Bengt, 1979, “Moral Hazard and Obesrvability”, Bell Journal of Economics, 13:324-340. Grossman, S. and O. Hart, 1983, “An Analysis of the Principal-Agent Problem”, Econometrica, 51: 7-45. (ii) Moral Hazard II: Multi-tasks multi-tasks application: incentive system of the firm * References Y BD LM Holmstrom, Bengt and Paul Milgrom, 1991, “Multi-task Principal-Agent Analyses: Incentive Contracts, Asset Ownership and Job Design”, Journal of Law, Economics and Organization, 7:24-52. 3
Holmstrom, Bengt and Paul Milgrom, 1994, “The Firm as an Incentive System”, American Economic Review, 84(4): 927-991 (iii) Adverse Selection I: Screening typical case: lemon market basic model: nonlinear pricing when principles compete for agents * general model: a continuum types * applications: credit rationing, optimal income taxation * References Y MP BD LM Akerlof, G., 1970, “The Market for Lemons: Quality Uncertainty and Market Mechanism”, Quarterly Journal of Economics, 84: 488-509. Mirrlees, James, 1971, “An Exploration in the Theory of Optimum Income Taxation”, Review of Economic Studies, 38: 175-208. Maskin, E. and J. Riley, 1984, “Monopoly with Incomplete Information”, Rand Journal of Economics 15: 171-196. (iv) Adverse Selection II: Signaling basic model: Spence’s model equilibrium refinement: intuitive criterion application: pecking-order theory of finance * References Y MP BD Spence, Michael, 1973, “Job Market Signaling,” Quarterly Journal of Economics, 87(3): 355-373. Cho, I. and DM Kreps, 1987, “Signaling Games and Stable Equilibria”, Quarterly Journal of Economics, 102(2): 179-221. (v) Adverse Selection III: Multidimensional Types * multiproduct monopoly problem application: exclusion in optimal contracts References BD Adams, William, and Janet Yellen, 1976, “Commodity Bundling and the Burden of Monopoly”, Quarterly Journal of Economics, 90, 475-498 Armstrong, M., 1999, “Price Discrimination by a Many-Product Firm”, Review of Economic Studies, 66: 151-168 (vi) Combining Adverse Selection and Moral Hazard 4
adverse selection followed by moral hazard moral hazard followed by adverse selection References LM Laffont, J.-J. and J. Tirole, 1986, “Using Cost Observation to Regulate Firms”, Journal of Political Economy, 94(3): 614-641. Laffont, J-J. and J. Tirole, 1993, A Theory of Incentives in Procurement and Regulation, MIT press. III Complete Contracts II: Static Multilateral Contracting (i) Moral Hazard III: Multiply Agents unobservable individual outputs: free-ride problem observable individual outputs: relative performance evaluation tournaments * References BD Alchian, Armen and Demsetz, Harold, 1972, “Production, Information Costs and Economic Organization”, American Economic Review, 62(50): 777-795. Holmstrom, Bengt, 1982, “Moral Hazard in Team”, Bell Journal of Economics, 10:74-91. Lazear, E., and S. Rosen, 1981, “Rank-Order Tournament as Optimal Labor Contracts”, Journal of Political Economy, 89: 841-864. (ii) Adverse Selection IV bilateral trading auction: private values auction: winner’s curse References BD Myerson, R., and M. Satterthwaite, 1983, “Efficient Mechanisms for Bilateral Trading”, Journal of Economic Theory, 29: 265-281. Klemperer, Paul, 1999, “Auction theory: A guide to the literature”, Journal of Economic Surveys, 13(3): 227-286. Klemperer, Paul, 2004, Auctions Theory and Practice, New Jersey: Princeton University Press. (iii) Collusion background basic insights an example adventures multi-principals * References Tirole, J., 1986, “Hierarchies and Bureaucracies: On the Role of Collusion in Organizations”, Journal of Law, Economics, and Organization, 2(2): 181-214. 5
Bernheim, B. Douglas, and Michael D. Whinston, 1986, “Common Agency”, Econometrica, 54 (4): 923-942. Dixit, Avinash, 1996, The Making of Economic Policy: A Transaction Cost Politics Perspective. Cambridge, MA: MIT Press. IV Complete Contracts III: Repeated Bilateral Contracting (i) Moral Hazard IV: Dynamics career concern: reputation moral hazard and renegotiation References BD LM Holmstrom, B., 1999, “Managerial Incentive Problems: A Dynamic Perspective”, Review of Economic Studies, 66(1): 169-182. Fudenberg, D. and J. Tirole, 1990, “Moral hazard and renegotiation in agency contracts”, Econometrica, 58: 1279-1320. (ii) Adverse Selection V: Dynamics Coasian dynamics adverse selection and renegotiation application: soft budget constraint References BD LM Hart, Oliver and J. Tirole, 1988, “Contract Renegotiation and Coasian Dynamics”, Review of Economic Studies, 55: 509-540. Kornai, J., 1979, “Resource-Constrained versus Demand-Constrained Systems”, Econometrica, 47(4): 801-820 V Incomplete Contracts (i) Transaction-cost Economics * the governance of contracts discrete structural alternatives TCE and behavioral economics ReferencesY Williamson, Oliver E., 1975, Markets and Hierarchies: Analysis and Antitrust Implications, New York: Macmillan. Williamson, Oliver E., 1985, The Economic Institute of Capitalism, New York: Free Press. Williamson, Oliver E., 1996, The Mechanism of Governance, New York: Oxford Univ. Press. Williamson, Oliver E., 2002, “Empirical Microeconomics: Another Perspective”, in The Economics of Choice, Change, and Organization, Mie Augier and James March, eds., 6
Brookfield, Vt.: Edward Elgar, forthcoming. 聂辉华，2004，“交易费用经济学：过去，现在和未来”，《管理世界》，第12期 (ii) GHM Model hold up model property rights and the theory of the firm recent development * ReferencesY Grossman, Sanford, and Oliver Hart, 1986, “The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration”, Journal of Political Economy, 94:691-719. Hart, Oliver and John Moore, 1990, “Property Rights and Nature of the Firm”, Journal of Political Economy, 98(6): 1119-1158. Hart, Oliver, 1995, Firm, Contract and Financial Structure, New York: Oxford Univ. Press. 杨瑞龙、聂辉华，2006，“不完全契约理论：一个综述”，《经济研究》，第2期 聂辉华、杨其静，2007，“产权理论遭遇的挑战及演变”，《南开经济研究》，第4期 聂辉华，2011，“不完全契约理论的转变”，《教学与研究》，第1期 (iii) Relational Contracts static implicit contracts dynamical implicit contracts Bull, C., 1987, “The existence of self-enforcing implicit contracts”, Quarterly Journal of Economics, 102: 147-159. Baker, George, Roberts Gibbons and Kevin Murphy, 2002, “Relational Contract and the Theory of the Firm”, Quarterly Journal of Economics, 117: 39-83. Levin, Jonathan, 2003, “Relational Incentive Contracts”, American Economic Review, 93 (3): 835–847 7
