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Questions tagged [contract-theory]

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3
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1answer
56 views

Relation between incomplete contracting and the principal agent problem?

I have read about incomplete contracts in the context of vertical integration of firms, in which the two contracting parties are relatively "symmetric" (we cannot say that one is the agent and the ...
0
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0answers
17 views

microeconomic model of software agents?

I am wondering whether there is a microeconomic analysis of software agents. There seem to be parrallels between software agents, or more generally, programs, and topics in economics: principal ...
5
votes
1answer
146 views

General mathematical model of incomplete contracts?

I have read various articles about incomplete contracts, like Hart's papers and Milgrom's papers. But I have not found a paper that defines mathematically, in the most general way possible, what an ...
2
votes
2answers
61 views

What kind of contractual problem is this?

Oliver Hart, a Nobel Price winning economist, made the following case against privately founded prisons in an interview from 2017: “There are some things that are difficult to specify [in a contract ...
1
vote
1answer
273 views

Reservation utility

I am self-studying contract theory using Bolton and Dewatripont (2005). It is meant for grad students, which might be why I am having a difficult time understanding basic terminology. Here is the ...
2
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0answers
85 views

A manifold of agents?

In contract theory and mechanism design, if the agents have one-dimensional characteristics, then they are usually considered as a contiuum on $\mathbb R$; if they have n-dimensional type, then they ...
2
votes
1answer
470 views

Adding a non-binding constraint to the objective function

I am dealing with a constrained optimization problem found in Tirole's Theory of corporate finance. My question is not related to the details of this model, but just to provide some context, we are ...
3
votes
1answer
21 views

how can I find the original work on the bases of which 2016 nobel in economics was given?

I have been google and googling and asking around and I can not find the work(s) on the basis of which the nobel in economics was given yesterday. I really wanted to read them. does anyone know how to ...
1
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0answers
62 views

Dynamic contract theory: Demarzo, Fishman(2007) optimal long term financial contracting

I am reading Demarzo, Fishman(RFS,2007). Any suggestion will be appreciated. My questions are the following: (a) \begin{equation*} b_T^e(a) = \left\{\begin{array}{lll} -e^{(\gamma-r)(...
0
votes
1answer
68 views

Smart contracts in Dollars

In last years I have read a lot about "Smart contracts". But I cannot understand why we need bitcoin for this? The old-fashioned US Dollar are not used in Smart Contracts?
1
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0answers
30 views

Foreseeability vs negligence

Why is it the case that contractual liability is usually defined by basis of foreseeability rather than negligence (like in tort law)? I am looking a good explanation for this from economics. I ...
0
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0answers
225 views

Principal agent question

Principal is interested in buying lake. The revenues of operating the lake as a camping site are determined by the weather (a random parameter $w$ distributed uniformly on $[0, 1]$) and by the ...
10
votes
3answers
18k views

What is the definition of “First Best”, “Second Best”, etc. in contract theory?

What is the definition of "First Best", "Second Best", etc. in contract theory? Especially, what is the difference between "First Best" in contract theory and "ex-post efficient" in mechanism design?
1
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1answer
82 views

Are there studies that empirically validate results in contract theory? [closed]

I have started learning contract theory of late, and I find some of the assumptions and findings of the theory are too technical. Are there empirical studies that have validated concepts in contract ...