NCER - Contract Theory

The National Centre for Econometric Research (NCER) will hold a short course titled, "Contract Theory" at QUT, on Thursday 16 February and Monday 20 February, 2012. If you are interested in attending, please contact the Administration Coordinator.

The lectures will be held in Room Z808, Gardens Point Campus, QUT.

Course Convener

Dr Jianpei Li, University of International Business and Economics, School of International Trade and Economics, Beijing.

Syllabus

Contract theory can be viewed as a set of tools and methods that apply to incentive problems under asymmetric information. The causes of informational asymmetries are diverse. The literature on contract theory distinguishes between hidden information problem (adverse selection and signalling) and hidden actions problems (moral hazard).

The adverse selection problems deal with optimal contracts designed by the uninformed party. The signalling problem, on the other hand, deal with optimal contracts by the informed party. In moral hazard, the asymmetries of information are posterior to the constitution of the contracts. The optimal contract design, in all three cases, relies on recognition of conflicting interests and provision of adequate incentives under uncertainty.

Course Schedule

Date and Time	Topic
Wednesday 15 February 2pm – 5pm	Lecture 1: A Brief Introduction to Contract Theory Lecture 2: Multi-agent Moral Hazard The focus is on contracting situations where a principal interacts with multiple agents, each taking hidden actions. The main issue to be concerned with are the extent to which competition or cooperation among agents shall be fostered, and how should agents be supervised or monitored.
Monday 20 February 9am – 12pm	Lecture 3: Incomplete Contract Most long-term contracts are incomplete. They do not deal explicitly with all possible contingencies and leave many decisions and transactions to be determined later. Moreover the court may be unable or unwilling to enforce some contracts. Even if the courts do enforce them, the parties themselves may want to renegotiate them. Given these elements of contract incomplete, the allocation of control rights and ownership protection are of major importance. Incomplete contract models are usually used as a tool to study economic institutions and organizations.

Date and Time

Topic

Wednesday 15 February
2pm – 5pm

Lecture 1: A Brief Introduction to Contract Theory

Lecture 2: Multi-agent Moral Hazard
The focus is on contracting situations where a principal interacts with multiple agents, each taking hidden actions. The main issue to be concerned with are the extent to which competition or cooperation among agents shall be fostered, and how should agents be supervised or monitored.

Monday 20 February
9am – 12pm

Lecture 3: Incomplete Contract

Most long-term contracts are incomplete. They do not deal explicitly with all possible contingencies and leave many decisions and transactions to be determined later. Moreover the court may be unable or unwilling to enforce some contracts. Even if the courts do enforce them, the parties themselves may want to renegotiate them. Given these elements of contract incomplete, the allocation of control rights and ownership protection are of major importance.

Incomplete contract models are usually used as a tool to study economic institutions and organizations.

Readings

Patrick Bolton and Mathias Dewatripont, Contract theory, Chapter 8, 11;
Holmstroem, B. (1982), Moral Hazard in Teams, Bell Journal of Economics, 13, 324-40.
Lazear, E. and Rosen, S. (1981), Rank-Order Tournaments as Optimum Labor Contracts, Journal of Political Economy, 89, 841-64.
Gershkov, A., J. Li, and Schweinzer, P. (2009), Efficient tournaments within teams, RAND Journal of Economics, 40, 103-119.
Hart, O. and J. Moore (1988), Incomplete contracts and renegotiation, Econometrica, 56, 755-85.
Hart, O. and J. Moore (1990), Property rights and the nature of the firms, Journal of Political Economy, 98, 1119-58.

Enquiries and Registration

For further details please contact the NCER Administration Coordinator:

Angela Fletcher
Queensland University of Technology
Email: a.fletcher@qut.edu.au