Microeconomics III (Information and Contract Theory)

Economics is about the creation of value through markets, organizations and other institutions. Asymmetric information and bounded rationality may get in the way of value creation. This course presents a number of insights from contract theory for dealing with these twin problems. It starts with moral hazard and adverse selection in elementary settings, then it turns to multidimensional incentive problems, contracts for teams, relational contracts, incomplete contracts, decision rights and authority, and asset ownership. It also includes a discussion of cheap talk and communication. These topics are approached by applying contract theory to problems in labour economics, organizational economics, and corporate finance.