The following lecture notes were created by Lars Stole. Used with permission.
Lectures on the Theory of Contracts
Sections 1 & 2: Preface and Moral Hazard and Incentives Contracts (PDF)
Table of Contents
1. Preface
2. Moral Hazard and Incentives Contracts (pg. 2)
2.1 Static Principal-Agent Moral Hazard Models (pg. 2)
2.1.1 The Basic Theory (pg. 2)
2.1.2 Extensions: Moral Hazard in Teams (pg. 16)
2.1.3 Extensions: A Rationale for Linear Contracts (pg. 23)
2.1.4 Extensions: Multi-Task Incentive Contracts (pg. 29)
2.2 Dynamic Principal-Agent Moral Hazard Models (pg. 36)
2.2.1 Efficiency and Long-Run Relationships (pg. 36)
2.2.2 Short-Term Versus Long-Term Contracts (pg. 37)
2.2.3 Renegotiation of Risk-Sharing (pg. 40)
Section 3: Mechanism Design and Self-Selection Contracts (PDF)
Table of Contents
3.1 Mechanism Design and the Revelation Principle (pg. 45)
3.1.1 The Revelation Principle for Bayesian-Nash Equilibria (pg. 46)
3.1.2 The Revelation Principle for Dominant-Strategy Equilibria (pg. 47)
3.2 Static Principal-Agent Screening Contracts (pg. 48)
3.2.1 A Simple 2-Type Model of Nonlinear Pricing (pg. 49)
3.2.2 The Basic Paradigm with a Continuum of Types (pg. 50)
3.2.3 Finite Distribution of Types (pg. 58)
3.2.4 Application: Nonlinear Pricing (pg. 62)
3.2.5 Application: Regulation (pg. 63)
3.2.6 Resource Allocation Devices with Multiple Agents (pg. 66)
3.2.7 General Remarks on the Static Mechanism Design Literature (pg. 74)
3.3 Dynamic Principal-Agent Screening Contracts (pg. 75)
3.3.1 The Basic Model (pg. 76)
3.3.2 The Full-Commitment Benchmark (pg. 76)
3.3.3 The No-Commitment Case (pg. 76)
3.3.4 Commitment with Renegotiation (pg. 82)
3.3.5 General Remarks on the Renegotiation Literature (pg. 84)
