# Tag Info

## Hot answers tagged contract-theory

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### What is the definition of "First Best", "Second Best", etc. in contract theory?

In contract theory The first-best refers to the best you could do if you knew agents' preferences over labor and income (i.e., if you did not have to impose the incentive compatibility constraint), ...

### Lab experiments for a course in standard contract theory

There are a couple of papers by Hoppe-Schmitz in GEB that might be useful: Hoppe, E.I. and Schmitz, P.W., 2011. Can contracts solve the hold-up problem? Experimental evidence. Games and Economic ...
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### Signalling in a moral hazard contract with informed principals (that know their own type before contracting)

I'm not sure what exactly you're looking for, but here are some wild guesses: Bolton and Dewatripont (2005) Contract Theory, MIT Press. [Probably Chapters 5 and 6] Maskin and Tirole (1990) "The ...
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### Expected Utility and Jensen's Inequality

Didn't manage to get to a definitve answer in one shot, but it seems to me that Jensen inequality is not going to help much. Build up: You are essentially asking that E_v \...
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1 vote
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### Reservation utility

I suspect the $μ$ is introduced to account for the fact that no party can be forced to enter into a contract. Thus if we want to maximize the joint surplus that only works if both parties are willing ...
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