Foreword
Introduction
l Incentives in Economic Thought
1.1 Adam Smith and Incentive Contracts in Agriculture
1.2 Chester Barlmrd and Incentives in Management
1.3 Hume, Wicksell, Groves: Tile Free-Rider Problem
1.4 Borda, Bowen, Vickrey: Incentives in Voting
1.5 Leon Walras and the Regulation of Natural Monopolies
1.6 Knight, Arrow, Pauly: Incentives in Insurance
1.7 Sidgwick, Vickrey, Mirrlees: Redistribution and Incentives
1.8 Dupuit, Edgeworth, Pigou: Price Discrimination
1.9 Incentives in Planned Economies
1.10 Leonid Hurwicz and Mechanism Design
1.11 Auctions
2 The Rent Extraction-Efficiency Trade-Off
2.1 The Basic Model
2.2 The Complete Information Optimal Contract
2.3 Incentive Feasible Menu of Contracts
2.4 Information Rents
2.5 The Optimization Program of the Principal
2.6 The Rent Extraction-Efficiency Trade-Off
2.7 The Theory of the Firm Under Asymmetric Information
2.8 Asymmetric Information and Marginal Cost Pricing
2.9 Tile Revelation Principle
2.10 A More General Utility Function for the Agent
2.11 Ex Ante versus Ex Post Participation Constraints
2.12 Commitment
2.13 Stochastic Mechanisms,
2.14 Informative Signals to Improve Contracting,
2.15 Contract Theory at Work
Appendix
3 Incentive and Participation Constraints with Adverse Selection
3.1 More than Two Types
3.2 Multidimensional Asymmetric Information
3.3 Type-Dependent Participation Constraint and Countervailing IncentiTces
3.4 Random Participation Constraint
3,5 Limited Liability
3,6 Audit Mechanisms and Costly State Verification
3.7 Redistributive Concerns and the Efficiency-Equity Trade-Off
Appendices
4 Moral Hazard: The Basic Trade-Offs
4.1 Tile Model
4.2 Risk Neutrality and First-Best hnplementation
4.3 The Trade-Off Between Limited Liability Rent Extraction and Efficiency
4.4 Tile Trade-Off Between Insurance and Efficiency
4.5 More than Two Levels of Performance
4.6 Informative Signals to Improve Contracting
4.7 Moral Hazard and the Theory of the Finn
4.8 Contract Theory at Work
4.9 Commitment Under Moral Hazard.
Appendices
5 Incentive and Participation Constraints with Moral Hazard.
5.1 More than Two Levels of Effort
5.2 The Multitask Incentive Problem
5.3 Nonseparability of the Utility Function
5.4 Redistribution and Moral Hazard Appendices
6 Nonverifiability
6.1 No Contract at Date 0 and Ex Post Bargaining
6.2 Incentive Compatible Contract
6.3 Nash Implementation
6.4 Subgame-Perfect Implementation
6.5 Risk Aversion
6.6 Concluding Remarks
7 Mixed Models
7.1 Adverse Selection Followed by Moral Hazard
7.2 Moral Hazard Followed by Adverse Selection
7.3 Moral Hazard Followed by Nonverifiability
8 Dynamics under Full Commitment
8.1 Repeated Adverse Selection
b.2 Repeated Moral Hazard
8.3 Constraints on Transfers: The Role of hnplicit Incentives
9 Limits and Extensions
9.1 Informed Principal.
9.2 Limits to Enforcement
9.3 Dynamics and Limited Commitment
9.4 The Hold-Up Problem
9.5 Limits to the Complexity of Contracts
9.6 Limits in the Action Space
9.7 Limits to Rational Behavior
9.8 Endogenous Information Structures
References
Author Index
Subject Index