Questions tagged [contract-theory]
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15
questions
0
votes
1answer
72 views
Expected Utility and Jensen's Inequality
Consider two random variables (costs and valuations) distributed $v\backsim G(.)$ and
$c \backsim F(.)$ with pdfs $g(.)$ and $f(.)$. Let the supports of $c$ and
$v$ be $[x,y]$. Let $x<a=E(v)<b&...
3
votes
1answer
71 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
votes
0answers
18 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
148 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 ...
3
votes
3answers
90 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
324 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
votes
0answers
88 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
497 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
vote
0answers
63 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
vote
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
votes
0answers
227 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 ...
12
votes
3answers
20k 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
vote
1answer
83 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 ...
