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The Economics of Contracts: A Primer, 2nd Edition

Author

Listed:
  • Bernard Salanié

    () (Columbia University)

Abstract

The theory of contracts grew out of the failure of the general equilibrium model to account for the strategic interactions among agents that arise from informational asymmetries. This popular text, revised and updated throughout for the second edition, serves as a concise and rigorous introduction to the theory of contracts for graduate students and professional economists. The book presents the main models of the theory of contracts, particularly the basic models of adverse selection, signaling, and moral hazard. It emphasizes the methods used to analyze the models, but also includes brief introductions to many of the applications in different fields of economics. The goal is to give readers the tools to understand the basic models and create their own. For the second edition, major changes have been made to chapter 3, on examples and extensions for the adverse selection model, which now includes more thorough discussions of multiprincipals, collusion, and multidimensional adverse selection, and to chapter 5, on moral hazard, with the limited liability model, career concerns, and common agency added to its topics. Two chapters have been completely rewritten: chapter 7, on the theory of incomplete contracts, and chapter 8, on the empirical literature in the theory of contracts. An appendix presents concepts of noncooperative game theory to supplement chapters 4 and 6. Exercises follow chapters 2 through 5.

Suggested Citation

  • Bernard Salanié, 2005. "The Economics of Contracts: A Primer, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195259, January.
  • Handle: RePEc:mtp:titles:0262195259
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    Citations

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    Cited by:

    1. Mason, Charles F. & Plantinga, Andrew J., 2013. "The additionality problem with offsets: Optimal contracts for carbon sequestration in forests," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 1-14.
    2. David Fernando Tobon Orozco & Germán Darío Valencia & Danny García Callejas & Guillermo Perez, 2004. "Institucionalidad e incentivos en la educación básica y media en Colombia," BORRADORES DEL CIE 002880, UNIVERSIDAD DE ANTIOQUIA - CIE.
    3. Anja Schöttner & Veikko Thiele, 2010. "Promotion Tournaments and Individual Performance Pay," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(3), pages 699-731, September.
    4. R. Guo & P. Zhang, 2014. "A general method of computing the cut-off point in adverse selection models," Applied Economics, Taylor & Francis Journals, vol. 46(33), pages 4116-4124, November.
    5. Trunin, Pavel & Bozhechkova, Alexandra & Goryunov, Eugene & Petrova, Diana, 2017. "Analysis of Approaches to Accounting of the Information Effects of Monetary Policy," Working Papers 031723, Russian Presidential Academy of National Economy and Public Administration.
    6. N. Packham, 2018. "Optimal contracts under competition when uncertainty from adverse selection and moral hazard are present," Papers 1801.04080, arXiv.org.
    7. Marco Alderighi, 2007. "Nonlinear Pricing In Asymmetric Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 46(3), pages 205-223, September.
    8. Eduard Marinov, 2016. "The 2016 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 97-149.
    9. Grant Miller & Kimberly Singer Babiarz, 2013. "Pay-for-Performance Incentives in Low- and Middle-Income Country Health Programs," NBER Working Papers 18932, National Bureau of Economic Research, Inc.
    10. Florin Bilbiie & D. Stasavage, 2005. "Incomplete Fiscal Rules with Imperfect Enforcement," Working Papers hal-00515668, HAL.
    11. Sinnewe, Elisabeth & Charles, Michael B. & Keast, Robyn, 2016. "Australia's Cooperative Research Centre Program: A transaction cost theory perspective," Research Policy, Elsevier, vol. 45(1), pages 195-204.
    12. Bannier, Christina E. & Feess, Eberhard & Packham, Natalie, 2014. "Incentive schemes, private information and the double-edged role of competition for agents," CFS Working Paper Series 475, Center for Financial Studies (CFS).
    13. repec:bla:ecorec:v:93:y:2017:i:302:p:379-394 is not listed on IDEAS
    14. Tsuyoshi Takahara, 2016. "Patient dumping, outlier payments, and optimal healthcare payment policy under asymmetric information," Health Economics Review, Springer, vol. 6(1), pages 1-11, December.
    15. Ilic, Dragan & Pisarov, Sonja & Schmidt, Peter S., 2015. "Preaching Water But Drinking Wine? Relative Performance Evaluation in International Banking," Working papers 2015/10, Faculty of Business and Economics - University of Basel.
    16. Schmidt, Robert & Pollrich, Martin & Stiel, Caroline, 2013. "An optimal incentive contract to avert firm relocation under unilateral environmental regulation," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79741, Verein für Socialpolitik / German Economic Association.
    17. Plehn-Dujowich, Jose M., 2009. "Endogenous growth and adverse selection in entrepreneurship," Journal of Economic Dynamics and Control, Elsevier, vol. 33(7), pages 1419-1436, July.

    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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