《契约理论》教学提纲

聂辉华

Contract Theory

Fall 2006

Compulsory for graduates in Major of Business Economics

Instructor: Huihua NIE

Office hours: Wed. forenoon and Thurs. afternoon by appointment

Office: Ming De Main Building 837

Email: niehuihua2000@yahoo.com.cn

Credit hour: 2

Course Meet: 09/07/2006 – 01/25/2007

Room: Ming De Main Building 0208

Thurs.: 6:00– 7:30 pm + 7:40–8:30 (supplement*)

Final exam date: 01/25/2007

Course Website http://www.mdn.cn/baisha（白鲨在线）

Textbook

Required:

(BD) Bolton, Patrick, and Mathias Dewatripont, 2005, Contract Theory, MA: MIT Press.

Prerequisites

This course is new totally and international-standard completely. 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. Anyone who has difficulty in understanding this course had better choose my teaching course titled as An Introduce to Game Theory for undergraduate.

Course Objectives

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 presentations of 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 some advanced topics of contract theory. Finally, students present and I review the selected papers that focus on some important topics.

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 and presentations. 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. The presentation will be counted, furthermore it is necessary to get your final grade. Anyone who presents in English will be encouraged by additional grades. Grades will be determined as follows:

Homework 30%

Presentation 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.

Course Schedule

I Introduction by 杨瑞龙教授, the rest by 聂辉华讲师

II Basic Framework of Contract Theory

III Complete Contracts I: Static Bilateral Contracting

(i) Moral Hazard I

n standard model

n basic model: two types

n general model: a continuum types

n first-order approach *

n application: sharecropping contracts, debt financing

(ii) Moral Hazard II

n multi-tasks

n multi-agents *

n multi-principals *

n application: incentive system of the firm, political economy of policy-making *

(iii) Adverse Selection I: Screening

n typical case: lemon market

n basic model: nonlinear pricing

n general model: a continuum types *

n applications: credit rationing, optimal income taxation

(v) Adverse Selection II: Signaling

n basic model: Spence’s model

n equilibrium refinement: intuitive criterion *

n application: pecking-order theory of finance *

(iv) Combining Adverse Selection and Moral Hazard

n adverse selection before moral hazard

n moral hazard before adverse selection

IV Complete Contracts II: Static Multilateral Contracting

(i) Moral Hazard III

n team production: free-ride problem

n tournament

n collusion *

(ii) Adverse Selection III

n bilateral trading

n auction: private values

n auction: common values *

V Complete Contracts III: Repeated Bilateral Contracting

(i) (Repeated) Adverse Selection IV

n Coasian dynamics

n adverse selection and renegotiation *

n application: soft budget constraint

n career concern: reputation

n moral hazard and renegotiation *

VI Incomplete Contracts

(i) Transaction-cost Economics

n the governance of contracts

n discrete structural alternatives

n TCE and behavioral economics *

(ii) GHM Model

n hold up model

n property rights and the theory of the firm

n recent development *

(iii) Relational Contracts

n static implicit contracts

n dynamical implicit contracts *

V Presentations

(i) Optimal Contracts

(ii) Moral Hazard

(iii) Holdup Problems

(iv) Tests for Contract Theory

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