Contract Theory, ECON 2060, Fall 2002

Transcription

1 Contract Theory, ECON 2060, Fall 2002 Oliver Hart *= required reading General References Reading List Fudenberg, D. and J. Tirole (1991), Game Theory, Cambridge, MIT Press, Ch 7 and 8. Hart, O. (1995), Firms, Contracts, and Financial Structure, Oxford University Press. Hart, O. and B. Holmstrom (1987), The Theory of Contracts, in Advances in Economic Theory, Fifth World Congress, Truman Bewley ed., Cambridge University Press. Laffont, J.-J. and J. Tirole (1993), A Theory of Procurement and Incentives in Regulation, MIT Press. Mas-Colell, A., M. Whinston and J. Green (1995), Microeconomic Theory, Ch 13, 4, & 23. Milgrom, P. and J. Roberts (1992), Economics, Organization and Management, Prentice- Hall. Moore, J. (1992), Implementation in Environments with Complete Information, in Advances in Economic Theory, Sixth World Congress, J.-J. Laffont ed., Cambridge University Press, Salanie, B. (1997), The Economics of Contracts: A Primer, MIT Press. 1. Adverse Selection (Screening) *Salanie, B., Ch 2. Armstrong, M. (1996), Multiproduct Nonlinear Pricing, Econometrica 64: Baron, D. and R. Myerson (1982), Regulating a Monopolist with Unknown Costs, Econometrica, July. Grossman, S. and O. Hart (1983), Implicit Contracts Under Asymmetric Information, Quarterly Journal of Economics 98:

2 Laffont, J.-J. and J. Tirole (1986), Using Cost Observation to Regulate Firms, Journal of Political Economy 94(3). Maskin, E. and J. Riley (1984), Monopoly with Incomplete Information, Rand Journal of Economics 15: Mas-Colell, A., M. Whinston and J. Green, Ch 13. Rochet, J.-C., and P. Chone (1998), Ironing, Sweeping, and Multidimensional Screening, Econometrica 66: Stiglitz, J. and A. Weiss (1981), Credit Rationing in Markets with Imperfect Information, American Economic Review 71: Moral Hazard *Salanie, B., Ch 5. *Grossman, S. and O. Hart (1983), An Analysis of the Principal-Agent Problem, Econometrica 51: *Holmstrom, B. (1979), Moral Hazard and Observability, Bell Journal of Economics 10: *Holmstrom, B. and P. Milgrom (1991), Multitask Principal-Agent Analyses, Journal of Law, Economics, and Organization 7: Special Issue. *Innes, R. (1990), Limited Liability and Incentive Contracting with Ex Ante Action Choices, Journal of Economic Theory 52(1): Jewitt, I. (1988), Justifying the First-Order Approach to Principal-Agent Problems, Econometrica 5: Mas-Colell, A., M. Whinston and J. Green, Chapter 14. Mirrlees, J. (1976) The Optimal Structure of Incentives and Authority Within an Organization, Bell Journal of Economics 7: Spring. Rogerson, W. (1985), The First-Order Approach to Principal-Agent Problems, Econometrica 53:

3 3. Multiagent Adverse Selection (Mechanism Design and Trading) *d Aspremont, C. and L. Gerard-Varet (1979), Incentives and Incomplete Information, Journal of Public Economics 11: Fudenberg, D and J. Tirole, Ch 5. Holmstrom, B and R. Myerson (1983), Efficient and Durable Decision Rules with Incomplete Information, Econometrica 51: Mookerjee, D. and S. Reichelstein (1989), Implementation via Augmented Revelation Mechanisms, Stanford University, Mimeo. *Myerson, R. and M. Satterthwaite (1983), Efficient Mechanisms for Bilateral Trading, Journal of Economic Theory 29: Multiagent Moral Hazard 4a. Moral Hazard in Teams, Tournaments and Hierarchies Calvo, G. and S. Wellicz (1978), Supervision, Loss of Control and the Optimal Size of the Firm, Journal of Political Economy 86: Demski, J. and D. Sappington (1984), Optimal Incentive Contracts with Multiple Agents, Journal of Economic Theory 33: *Green, J. and N. Stokey (1983), A Comparison of Tournaments and Contracts, Journal of Political Economy 91: *Holmstrom, B. (1982), Moral Hazard in Teams, Bell Journal of Economics 13: Lazear, E. and S. Rosen (1981), Rank Order Tournaments as Optimal Labor Contracts, Journal of Political Economy. *Legros, P. and S. Matthews (1993), Efficient and Nearly Efficient Partnerships, Review of Economic Studies 60: Legros, P. and H. Matsushima (1991), Efficiency in Partnership, Journal of Economic Theory 55: Melumad, N., Mookerjee, D. and S. Reichelstein (1995), Hierarchical Decentralization of Incentive Contracts, Rand Journal of Economics 26:

4 Qian, Y. (1994), Incentives and Loss of Control in an Optimal Hierarchy, Review of Economic Studies 61: b. Cooperation and Collusion *Holmstrom, B. and P. Milgrom (1990), Regulating Trade Among Agents, Journal of Institutional and Theoretical Economics 146. Itoh, H. (1991), Incentives to Help in Multi-Agent Situations, Econometrica 59: Kofman, A. and J. Lawarree (1993), Collusion in Hierarchical Agency, Econometrica 61: Laffont J.-J. and D. Martimort (1997), The Firm as a Multi-Contract Organization, Journal of Economics and Management Strategy 6: Laffont J.-J. and D. Martimort (1998), Collusion and Delegation, Rand Journal of Economics 29: Laffont J.-J. and D. Martimort (1995), Collusion Under Asymmetric Information, Econometrica 65: *Tirole, J. (1986), Hierarchies and Bureaucracies, Journal of Law, Economics and Organization 2: *Tirole, J. (1993), Collusion and the Theory of Organizations, in J.-J. Laffont ed., Advances in Economic Theory, Sixth World Congress of the Econometric Society, Cambridge University Press. 5. Dynamic Adverse Selection Atkeson, A. and R. Lucas (1992), On Efficient Distribution with Private Information, Review of Economic Studies 59: Dewatripont, M. (1989), Renegotiation and Information Revelation over Time: The Case of Optimal Labor Contracts, Quarterly Journal of Economics 104: *Dewatripont, M. and E. Maskin (1990), Contract Renegotiation in Models of Asymmetric Information, European Economic Review 34: *Dewatripont, M. and E. Maskin (1995), Credit and Efficiency in Centralized and Decentralized Economies, Review of Economic Studies 62: Freixas, X., R. Guesnerie and J. Tirole (1985), Planning Under Incomplete Information and the Ratchet Effect, Review of Economic Studies 52: Green, E. (1987), Lending and Smoothing of Uninsurable Income, in Prescott and Wallace eds., Contractual Arrangements for Intertemporal Trade, University of Minnesota Press. 4

5 *Hart, O. and J. Tirole (1988), Contract Renegotiation and Coasian Dynamics, Review of Economic Studies 55: Laffont, J.-J. and J. Tirole (1988), The Dynamics of Incentive Contracts, Econometrica 56: *Laffont, J.-J. and J. Tirole (1988), Comparative Statics of the Optimal Dynamic Incentive Contract, European Economic Review 31: Rey, P. and B. Salanie (1996), On the Value of Commitment with Asymmetric Information, Econometrica 64: *Thomas, J. and T. Worral (1990), Income Fluctuation and Asymmetric Information: An Example of a Repeated Principal-Agent Problem, Journal of Economic Theory 51: Townsend, R. (1982), Optimal Multiperiod Contracts and the Gain from Enduring Relationships under Private Information, Journal of Political Economy 90: Dynamic Moral Hazard Salanie, B., Ch 6. 6a. Explicit Incentive Schemes *Chiappori, P.-A., I. Macho, P. Rey, and B. Salanie (1994), Repeated Moral Hazard: The Role of Memory, Commitment and the Access to Credit Markets, European Economic Review 38: Fudenberg, D., Holmstrom, B. and P. Milgrom (1990), Short-term Contracts and Long-term Agency Relationships, Journal of Economic Theory 51. *Fudenberg, D. and J. Tirole (1990), Moral Hazard and Renegotiation in Agency Contracts, Econometrica 58. *Hermalin, B. and M. Katz (1991), Moral Hazard and Verifiability: The Effects of Renegotiation in Agency, Econometrica 59: *Holmstrom, B. and P. Milgrom (1987), Aggregation and Linearity in the Provision of Intertemporal Incentives, Econometrica 55: Ma, A. (1991), Adverse Selection in Dynamic Moral Hazard, Quarterly Journal of Economics 106: Ma, A. (1994), Renegotiation and Optimality in Agency Contracts, Review of Economic Studies 61: Malcomson, J. and F. Spinnewyn (1988), The Multi-Period Principal-Agent Problem, Review 5

6 of Economic Studies July: *Matthews, S. (1995), Renegotiation of Sales Contracts, Econometrica 63: Radner, R. (1981), Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship, Econometrica 49: Rey, P. and B. Salanie (1990), Long-term, Short-term and Renegotiation: On the Value of Commitment in Contracting, Econometrica 58: Rogerson, W. (1985), Repeated Moral Hazard, Econometrica 53: Rubinstein, A. and M. Yaari (1983), Repeated Insurance Contracts and Moral Hazard, Journal of Economic Theory 30: b. Career Concerns Dewatripont, M., I. Jewitt and J. Tirole (1999), The Economics of Career Concerns, Part I: Comparing Information Structures, Review of Economic Studies, January. Dewatripont, M., I. Jewitt, and J. Tirole (1999), The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies, Review of Economic Studies, January. Gibbons, R. (1997), Incentives and Careers in Organizations, in Advances in Economic Theory and Econometric: 7 th World Congress of the Econometric Society, Kreps and Wallis eds., Cambridge University Press. *Gibbons, R. and K. Murphy (1992), Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence, Journal of Political Economy 100: *Holmstrom, B. (1982, 1999), Managerial Incentive Problems: A Dynamic Perspective, Review of Economic Studies, January Holmstrom, B. and J. Ricart-I-Costa (1986), Managerial Incentives and Capital Management, Quarterly Journal of Economics 101: Meyer, M. and J. Vickers (1997), Performance Comparisons and Dynamic Incentives, Journal of Political Economy 105: Meyer, M. and J. Zwiebel (1996), Learning and Self-Reinforcing Behavior in Organizations, Working Paper, Nuffield College, Oxford. Prendergast, C. (1992), Career Development and Specific Human Capital Acquisition, Quarterly Journal of Economics 108: The Incomplete Contracts Approach 6

7 *Hart, O. (1995), Firms, Contracts, and Financial Structure, Oxford University Press. Salanie, B., Ch 7. 7a. Background Coase, R. (1937), The Nature of the Firm, Economica, 4: , reprinted in G. Stigler and K. Boulding (1952), eds., Readings in Price Theory, Homewood, Ill: Richard D. Irwin. Williamson, O. (1975), Markets and Hierarchies: Analysis and Antitrust Implications, New York: Free Press. Klein, B., R. G. Crawford, and A. A. Alchian (1978), Vertical Integration, Appropriable Rents, and the Competitive Contracting Process, Journal of Law and Economics, b. The Basic Framework *Hart, O., Ch 2-4. *Grossman, S. and O. Hart (1986), The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration, Journal of Political Economy, August. Bolton, P. and M. Whinston (1993), Incomplete Contracts, Vertical Integration, and Supply Assurance, Review of Economic Studies 60: Hart, O. and J. Moore (1990), Property Rights and the Nature of the Firm, Journal of Political Economy 98: c. Holdup and Renegotiation Aghion, P., M. Dewatripont and P. Rey (1994), Renegotiation Design with Unverifiable Information, Econometrica 62: *Hart, O. and J. Moore (1988), Incomplete Contracts and Renegotiation, Econometrica 56: *Che, Y.-K. and D. Hausch (1999), Cooperative Investments and the Value of Contracting, American Economic Review 89: Chung, T.-Y. (1991), Incomplete Contracts, Specific Investments, and Risk-Sharing, Review of Economic Studies 58: *Edlin, A. and S. Reichelstein (1996), Hold-ups, Standard Breach Remedies and Optimal Investment, American Economic Review 86: MacLeod, B. and J. Malcomson (1993), Investment, Hold-Up, and the Form of Market Contracts, American Economic Review 83:

8 Malcomson, J. (1997), Contracts, Hold-Up, and Labor Markets, Journal of Economic Literature 35: Noldeke, G. and K. Schmidt (1995), Option Contracts and Renegotiation: A Solution to the Hold-Up Problem, Rand Journal of Economics 26: d. Extensions and Applications of the Framework (1) Organization Design and the Allocation of Authority within Firms Aghion, P., M. Dewatripont and P. Rey (2000), Partial Contracting, Control Allocation, and Cooperation, mimeo UCL. *Aghion, P. and J. Tirole (1997), Real and Formal Authority in Organizations, Journal of Political Economy 105: Aghion, P. and P. Bolton (2000), Incomplete Social Contracts, mimeo Harvard. DeMeza, D. and B. Lockwood (1999), Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm, Quarterly Journal of Economics 114. Halonen, M. (2001), Reputation and Allocation of Ownership, Economic Journal, forthcoming. Baker, G., R. Gibbons and K. Murphy (2002), Relational Contracts and the Theory of the Firm, Quarterly Journal of Economics 117: Levin, J. (2002), Relational Incentive Contracts, mimeo, Stanford University, March. Hart, O. and J. Moore (1999), Cooperatives versus Outside Ownership, Quarterly Journal of Economics 114. Hart, O. and J. Moore (1999), On the Design of Hierarchies: Coordination versus Specialization, mimeo Harvard. Milgrom, P. (1988), Employment Contracts, Influence Activities and Efficient Organization Design, Journal of Political Economy 96: Rajan, R. and L. Zingales (1998), Power in a Theory of the Firm, Quarterly Journal of Economics 113: Rotemberg, J. (1994), Power in Profit-Maximizing Organizations, Journal of Management and Strategy 2. Stole, L. and J. Zwiebel (1996a), Organizational Design and Technology Choice Under Intrafirm Bargaining, American Economic Review 86: Stole, L. and J. Zwiebel (1996b), Intrafirm Bargaining under Nonbinding Contracts, Review of Economic Studies 63:

9 *Tadelis, S. (1999), What s in a Name? Reputation as a Tradeable Asset, American Economic Review 89: Hart, O., and B. Holmstrom (2002), A Theory of Firm Scope, mimeo, Harvard University. Grossman, G., and E. Helpman (2002), Integration versus Outsourcing in Industry Equilibrium, Quarterly Journal of Economics 117: Baker, G. and T. Hubbard (2000), Contractibility and Asset Ownership: On-Board Computers and Governance in U.S. Trucking, Working Paper #7634, National Bureau of Economic Research. Baker, G., and T. Hubbard (2002), Make Versus Buy in Trucking: Asset Ownership, Job Design and Information, mimeo, Harvard Business School. Woodruff, C. (2002), Non-contractible Investments and Vertical Integration in the Mexican Footwear Industry, forthcoming in International Journal of Industrial Organization. Whinston, M. (2002) On the Transaction Cost Determinants of Vertical Integration, mimeo, Northwestern University. (2) Corporate Finance Hart, O., Ch 5-6. *Aghion, P. and P. Bolton (1992), An Incomplete Contracts Approach to Financial Contracting, Review of Economic Studies 59: Berglof, E. and E.-L. von Thadden (1994), Short-term vs. Long-term Interests: Capital Structure with Multiple Investors, Quarterly Journal of Economics 109, November. Bolton, P. and D. Scharfstein (1990), A Theory of Predation Based on Agency Problems in Financial Contracting, American Economic Review 80: Bolton, P. and D. Scharfstein (1996), Optimal Debt Structure and the Number of Creditors, Journal of Political Economy 104. Dewatripont, M. and J. Tirole (1994), A Theory of Debt and Equity: Diversity of Securities and Manager Shareholder Congruence, Quarterly Journal of Economics 109: *Hart, O. and J. Moore (1998), Default and Renegotiation: A Dynamic Model of Debt, Quarterly Journal of Economics 113: Hart, O. and J. Moore (1994), A Theory of Debt Based on the Inalienability of Human Capital, Quarterly Journal of Economics 109, November. Aghion, P., and J. Tirole (1994), The Management of Innovation, Quarterly Journal of Economics 109:

10 Kaplan, S. and P. Stromberg (2002), Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts, forthcoming in Review of Economic Studies. Lerner, J., and R. P. Merges (1998), The Control of Technology Alliances: An Empirical Analysis of the Biotechnology Industry, Journal of Industrial Economics 46: Lerner, J., and D. Elfenbein (2001), Links and Hyperlinks: An Empirical Analysis of Internet Portal Alliances, NBER Working Paper No. 8251, April. Hart, O. (2001), Financial Contracting, Journal of Economic Literature 34: (3) Private vs. Public Ownership Laffont, J.-J. and J. Tirole (1993), A Theory of Incentives in Regulation and Procurement, Chapter 17, MIT Press. Schmidt, K. (1996), The Costs and Benefits of Privatization: An Incomplete Contract Approach, Journal of Law, Economics and Organization 12: Shleifer, A., and R.W. Vishny (1994), Politicians and Firms, Quarterly Journal of Economics 109: *Hart, O., A. Shleifer and R.W. Vishny (1997), The Proper Scope of Government: Theory and an Application to Prisons, Quarterly Journal of Economics 112: Shleifer, A. (1998), State Versus Private Ownership, Journal of Economic Perspectives 12: e. Foundations *Hart, O. and J. Moore (1999), Foundations of Incomplete Contracts, Review of Economic Studies 66: Maskin, E. (1999), Nash Equilibrium and Welfare Optimality, Review of Economic Studies. *Maskin, E. and J. Tirole (1999), Unforeseen Contingencies and Incomplete Contracts, Review of Economic Studies 66: Maskin, E. and J. Tirole (1999), Two Remarks on the Property-Rights Literature, Review of Economic Studies 66: Maskin, E. and J. Moore (1999), Implementation and Renegotiation, Review of Economic Studies 66: Moore, J. (1992), Implementation in Environments with Complete Information, in Advances in Economic Theory: Sixth World Congress, J.J. Laffont ed., Cambridge University Press, pp

11 Moore, J. and R. Repullo (1988), Subgame Perfect Implementation, Econometrica 56: Segal, I. (1999), Complexity and Renegotiation: A Foundation for Incomplete Contracts, Review of Economic Studies 66: *Tirole, J. (1999), Incomplete Contracts: Where Do We Stand?, Econometrica 67: