Instructional goals
This course aims at presenting in a simple though rigorous form the main models in contract theory. Contract theory studies the class of relations between allocative afficiency, norms, contractual relations and incentives systems. As such, contract theory forms the formal ground for a variety of managerial and entrepreneurial practices. More to the point, it aims at understanding and managing those phenomena related to surplus creation relative to social interactions under contractual incompleteness’ assumption.
Prerequisites
Fundamentals of microeconomics (game theory), probability theory and linear algebra.
Intended learning outcomes
The main outcome of the course is giving the student both awareness and familiarity with the theory’ main models. At the very same time, a working knowledge of the theory together with an understanding of its applicability to real world situations will be given.
Course Contents
Efficiency, incentive schemes, contractual incompleteness, agency relations, moral hazard, adverse selection. screening, signaling, reputation, property rights.
Reference Books
Macho-Stadler I. and J.D. Pérez-Castrillo (1997). An Introduction to the Economics of Information:
Incentives and Contracts. Oxford: Oxford University Press.
Kreps, D. The Motivation Toolkit. How to Align your Employees' Interests with Your Own. WW Norton, NY (NY), 2018
Teaching Methods
Lectures, practices and group work with in class presentations.
Assessment Method
30% of the final grade will be attributed to in class group presentations. Students will be required to present and discuss academic papers and case studies as well. Working groups will be organized on the ground of the total number of participants. There will be up to three presentations. This kind of work will help us verify both a full and analytical understanding of the topics and a good attitude towards discussing and presenting the assigned readings.
20% of the final grade will be attributed to a presentation that students are called to organize A to Z. This means that they will choose the topic, collect and read data and relevant literature and organize a sound presentation. For this presentation, no help will be given whatsoever.
50% of the final grade will be attributed to a final written examination. This will be based on multiple choice questions (these will however require a sound written argument beyond the mere “choose the right answer”), open questions and exercises. The number of of questions and the allotted time will be decided by the instructor and made known in due time.
Any grade below 18/30 will be a “fail”.
Active class participation, excellent presentations and an excellent final exam (both with respect to clarity, accuracy and exactness) will get you a full 30/30 cum laude.
A distinction between attending vs non attending student will be made.
You will be considered as an attending student and treated accordingly iff you had taken active part in the presentations works
The “attending” status will hold true for the first two exam sessions
After that you will lose the attending status and become a non attending student
As such you will be requested to present a specific (wider and somehow harder) exam program.
The "non attending students" program will be found on Luiss Learn.
Thesis assignment criteria
Successfully passing the examination and a working knowledge of english.
Does the syllabus cover sustainability topics?
No
Week 1 Contenuto sessioni on line e on campus
On campus session. Introduction
On line session. Efficiency and incentives I
Week 2 Contenuto sessioni on line e on campus
On campus session. Efficiency and incentives II
On line session. Agency relations. Principal-Agent model
Week 3 Contenuto sessioni on line e on campus
On campus session. Moral hazard
On line session. Moral hazard: optimal contract under complete information
Week 4 Contenuto sessioni on line e on campus
On campus session. Moral hazard: optimal contract under asymmetric information
On line session. Experimental session
Week 5 Contenuto sessioni on line e on campus
On campus session. Group presentation
On line session. Moral hazard: extensions
Week 6 Contenuto sessioni on line e on campus
On campus session. Team production I
On line session. Team production II
Week 7 Contenuto sessioni on line e on campus
On campus session. Adverse selection.
On line session. Akerlof ‘s model: “The Market for Lemons”.
Week 8 Contenuto sessioni on line e on campus
On campus session. Signaling
On line session. Spence model: “Job Market Signaling”
Week 9 Contenuto sessioni on line e on campus
On campus session. Group presentation
On line session. Efficiency wages and involuntary unemployment
Week 10 Contenuto sessioni on line e on campus
On campus session. Shapiro- Stiglitz’s model “Equilibrium Unempolyment as a worker discipline device”
On line session. Experimental session
Week 11 Contenuto sessioni on line e on campus
On campus session. Group presentation
On line session. Hold-up, unilateral investment
Week 12 Contenuto sessioni on line e on campus
On campus session. Vertical Integration
On line session. Research topics