14 129 Contract Theory Fall 1999 1 M W 10 30 12 00 E51 361 Instructors Susan Athey E52 252C x3 6407 athey mit edu Bengt Holmstrom E52 271d 3 0506 bengt mit edu TA Svetlana Danilkina sdanilki mit edu office E52 300 Reading List on reserve at Dewey Library required reading in reading packet required reading not in reading packet will be handed out General References Athey S P Milgrom and J Roberts 1998 Robust Comparative Statics unpublished research monograph Bolton P and M Dewatripont 1998 Introduction to Contract Theory book manuscript Fudenberg D and J Tirole 1991 Game Theory Cambridge MIT Press Chapter 7 Hart O 1995 Firms Contracts and Financial Structure Oxford England Oxford University Press Hart O and B Holmstrom 1987 The Theory of Contracts in Advances in Economic Theory Fifth World Congress edited by Truman Bewley Cambridge Cambridge University Press Holmstrom B and J Tirole 1989 The Theory of the Firm in Handbook of Industrial Organization R Schmalensee and R Willig eds New York Elsevier Publishing Co Laffont J J and J Tirole 1993 A Theory of Procurement and Incentives in Regulation Cambridge MIT Press Mas Colell A M Whinston J Green 1995 Microeconomic Theory Chapters 13 4 23 Milgrom P and J Roberts 1992 Economics Organization and Management Englewood Cliffs N J PrenticeHall Sappington D 1991 Incentives in Principal Agent Relationships Journal of Economic Perspectives 5 45 66 Prendergast C and L Stole 1993 Lectures on the Theory of Contracts and Organizations Unpublished manuscript Salanie B 1997 The Economics of Contracts A Primer MIT Press Williamson O 1985 The Economic Institutions of Capitalism New York Free Press 1 Moral Hazard Athey Grossman S and O Hart 1983 An Analysis of the Principal Agent Problem Econometrica 51 7 45 Hart and Holmstrom 1987 Part I The Theory of Contracts in Advances in Economic Theory Fifth World Congress edited by Truman Bewley Cambridge Cambridge University Press 14 129 Contract Theory Fall 1999 2 Holmstrom B and P Milgrom 1991 Multi Task 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 45 67 Jensen M and K J Murphy 1987 Performance Pay and Top Management Incentives Journal of Political Economy 98 2 April 1990 Jewitt I 1988 Justifying the First Order Approach to Principal Agent Problems Econometrica 5 1177 1190 Jewitt I 1997 Information and Principal Agent Problems mimeo University of Bristol Mas Colell Whinston Green Chapter 14 Mirlees J 1976 The Optimal Structure of Incentives and Authority within an Organization Bell Journal of Economics 7 1 Spring Prendergast and Stole Chapter 1 Rogerson W 1985 The First Order Approach to Principal Agent Problems Econometrica 53 1357 1368 2 Adverse Selection Athey Akerlof G 1970 The Market for Lemons Quality and the Market Mechanism Quarterly Journal of Economics 84 488 500 Baron D and R Myerson 1982 Regulating a Monopolist with Unknown Costs Econometrica July Demski J and D Sappington 1984 Optimal Incentive Contracts with Multiple Agents Journal of Economic Theory 33 152 171 Hart and Holmstrom Part II Laffont J J and J Tirole 1986 Using Cost Observation to Regulate Firms Journal of Political Economy 94 3 Laffont J J and J Tirole 1993 A Theory of Procurement and Incentives in Regulation Chapter 2 Lewis T and D Sappington 1989 Counterveiling Incentives in Agency Theory Journal of Economic Theory 29 1 21 Maskin E and J Riley 1984 Monopoly with Incomplete Information Rand Journal of Economics 15 171 96 Matthews S and J Moore 1987 Monopoly Provision of Quality and Warranties An Exploration in the Theory of Multidimensional Screening Econometrica 52 441 468 Mussa M and S Rosen 1978 Monopoly and Product Quality Journal of Economic Theory 18 301 317 Mas Colell Whinston Green Chapter 13 Prendergast Stole Chapter 2 Riordan M and D Sappington 1989 Second Sourcing Rand Journal of Economics 20 1 41 58 14 129 Contract Theory Fall 1999 3 Sappington D 1984 Incentive Contracting with Asymmetric and Precontractual Knowledge Journal of Economic Theory 34 52 70 3 Mechanism Design and Trading Athey d Aspremont C and L Gerard Varet 1979 Incentives and Incomplete Information Journal of Public Economics 11 24 45 Fudenberg D and J Tirole 1991 Chapter 7 Harris M and R Townsend 1981 Resource Allocation under Asymmetric Information Econometrica 49 147799 Holmstrom B and R Myerson 1983 Efficient and Durable Decision Rules with Incomplete Information Econometrica 51 1799 1819 Laffont J J and E Maskin 1980 A Differentiable Approach in Dominant Strategy Mechanisms Econometrica 48 1507 1520 Linhart P B et al 1992 Chapter1 Introduction in Bargaining with Incomplete Information P B Linhart et al eds Academic Press Mas Colell Whinston Green Chapter 23 McAfee R P 1993 Mechanism Design by Competing Sellers Econometrica 61 3 November McAfee R P 1991 Efficient Allocation with Continuous Quantities Journal of Economic Theory 53 51 74 McAfee R P 1992 Correlated Information and Mechanism Design Econometrica 60 2 395 421 Myerson R 1985 Bayesian Equilibrium and Incentive Compatibility An Introduction In Social Goals and Social Organization edited by L Hurwicz D Schmeidler and H Sonnenschein Myerson R 1981 Optimal Coordination Mechanisms in a Generalized Principal Agent Problem Journal of Mathematical Economics Myerson Roger and M Satterthwaite 1983 Efficient Mechanisms for Bilateral Trading Journal of Economic Theory 29 265 281 4 Auctions Athey Athey S K Bagwell and C Sanchirico 1998 Collusion with Private Information mimeo Bulow J and P Klemperer 1996 Auctions Versus Negotiations 86 1 180 192 Bulow J and J Roberts 1989 The Simple Economics of Optimal Auctions Journal of Political Economy 97 5 1060 1090 Dasgupta P and Maskin E 1997 Notes on Efficient Auctions mimeo Harvard Univ Engelbrecht Wiggans R 1993 Optimal Auctions Revisited Games and Economic Behavior 5 2 227 239 Engelbrecht Wiggans R Milgrom P and R Weber 1983 Competitive Bidding and Proprietary Information Journal of Mathematical Economics 11 161 169 14 129 Contract Theory Fall 1999 4 Harris M and A Raviv 1981 Allocation Mechanisms and the Design of Auctions Econometrica 49 6 14771499 Krishna K 1993 Auctions with Endogenous Valuations The Persistence of Monopoly Revisited American Economic Review 83 1 147 160 McAfee R P and J McMillan 1987 Auctions and Bidding Journal of Economic Literature XXV pp 699 738 McAfee R P and J McMillan 1992