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A Numerical Approach to the Contract Theory: the Case of Adverse Selection


  • Hideo Hashimoto

    (Osaka University)

  • Kojun Hamada

    (Niigata University)

  • Nobuhiro Hosoe

    (National Graduate Institute for Policy Studies)


By building and solving numerical models of the parts supply problems (an example of the adverse selection problems), and analyzing various issues of the contract theory, we demonstrate the benefits of the numerical approach. First, this approach facilitates the understanding of the contract theory by beginners, who find it difficult to comprehend the theoretical and general models. Second, this approach could extend the analysis areas beyond those of the theoretical models, which are limited by the simplifying assumptions imposed in order to make their analysis possible. The expansion of the number of the supplier types is one example.

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  • Hideo Hashimoto & Kojun Hamada & Nobuhiro Hosoe, 2012. "A Numerical Approach to the Contract Theory: the Case of Adverse Selection," GRIPS Discussion Papers 11-27, National Graduate Institute for Policy Studies.
  • Handle: RePEc:ngi:dpaper:11-27

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    References listed on IDEAS

    1. Hideo Hashimoto & Kojun Hamada & Nobuhiro Hosoe, 2011. "Contract Theory: A Programming-Model Approach," GRIPS Discussion Papers 10-34, National Graduate Institute for Policy Studies.
    2. Nobuhiro Hosoe & Kenji Gasawa & Hideo Hashimoto, 2010. "Textbook of Computable General Equilibrium Modelling," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-28165-3.
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    Numerical approach; principal-agent problem; adverse selection; numerical and computational model; Spence-Mirrlees single crossing property; monotonicity;
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