Laffont Jean-Jacques The Theory of Incentives

The Theory of Incentives: The Principal-Agent Model. The Theory of IncentivesEconomics has much to do with incentives--not least, incentives to work hard, to produce quality products, to study, to invest, and to save. Although Adam Smith amply confirmed this more than two hundred years ago in his analysis of sharecropping contracts, only in recent decades has a theory begun to emerge to place the topic at the heart of economic thinking. In this book, Jean-Jacques Laffont and David Martimort present the most thorough yet accessible introduction to incentives theory to date. Central to this theory is a simple question as pivotal to modern-day management as it is to economics research: What makes people act in a particular way in an economic or business situation? In seeking an answer, the authors provide the methodological tools to design institutions that can ensure good incentives for economic agents. This book focuses on the principal-agent model, the "simple" situation where a principal, or company, delegates a task to a single agent through a contract--the essence of management and contract theory. How does the owner or manager of a firm align the objectives of its various members to maximize profits?Following a brief historical overview showing how the problem of incentives has come to the fore in the past two centuries, the authors devote the bulk of their work to exploring principal-agent models and various extensions thereof in light of three types of information problems: adverse selection, moral hazard, and non-verifiability. Offering an unprecedented look at a subject vital to industrial organization, labor economics, and behavioral economics, this book is set to become the definitive resource for students, researchers, and others who might find themselves pondering what contracts, and the incentives they embody, are really all about. xi Foreword Introduction 1 1 Incentives in Economic Thought 7 1.1 Adam Smith and Incentive Contracts in Agriculture 8 1.2 Chester Barnard and Incentives in Management 11 1.3 Hume, Wicksell, Groves: The Free-Rider Problem 14 1.4 Borda, Bowen, Vickrey: Incentives in Voting 15 1.5 Leon Walras and the Regulation of Natural Monopolies 18 1.6 Knight, Arrow, Pauly: Incentives in Insurance 18 1.7 Sidgwick, Vickrey, Mirrlees: Redistribution and Incentives 20 1.8 Dupuit, Edgeworth, Pigou: Price Discrimination 22 1.9 Incentives in Planned Economies 23 1.10 Leonid Hurwicz and Mechanism Design 25 1.11 Auctions 27 2 The Rent Extraction-Efficiency Trade-Off 28 2.1 The Basic Model 32 2.2 The Complete Information Optimal Contract 33 2.3 Incentive Feasible Menu of Contracts 36 2.4 Information Rents 39 2.5 The Optimization Program of the Principal 40 2.6 The Rent Extraction-Efficiency Trade-Off 41 2.7 The Theory of the Firm Under Asymmetric Information 46 2.8 Asymmetric Information and Marginal Cost Pricing 48 2.9 The Revelation Principle 48 2.10 A More General Utility Function for the Agent 51 2.11 Ex Ante versus Ex Post Participation Constraints 57 2.12 Commitment 63 2.13 Stochastic Mechanisms 65 2.14 Informative Signals to Improve Contracting 68 2.15 Contract Theory at Work 72 Appendix 81 3 Incentive and Participation Constraints with Adverse Selection 82 3.1 More than Two Types 86 3.2 Multidimensional Asymmetric Information 93 3.3 Type-Dependent Participation Constraint and Countervailing Incentives 101 3.4 Random Participation Constraint 115 3.5 Limited Liability 118 3.6 Audit Mechanisms and Costly State Verification 121 3.7 Redistributive Concerns and the Efficiency-Equity Trade-Off 134 Appendices 130 4 Moral Hazard: The Basic Trade-Offs 145 4.1 The Model 148 4.2 Risk Neutrality and First-Best Implementation 153 4.3 The Trade-Off Between Limited Liability Rent Extraction and Efficiency 155 4.4 The Trade-Off Between Insurance and Efficiency 158 4.5 More than Two Levels of Performance 163 4.6 Informative Signals to Improve Contracting 167 4.7 Moral Hazard and the Theory of the Firm 172 4.8 Contract Theory at W Forfattere: David Martimort, Jean-Jacques Laffont Utgave: ukjent Språk: Engelsk Sidetall: 440 ISBN: 9780691091846 Vekt: 794 g Forla Princeton University Press Innbindin Heftet Utgitt: 2001 Veil. pris: 0 kr

The Theory of Incentives: The Principal-Agent Model. The Theory of IncentivesEconomics has much to do with incentives--not least, incentives to work hard, to produce quality products, to study, to invest, and to save. Although Adam Smith amply confirmed this more than two hundred years ago in his analysis of sharecropping contracts, only in recent decades has a theory begun to emerge to place the topic at the heart of economic thinking. In this book, Jean-Jacques Laffont and David Martimort present the most thorough yet accessible introduction to incentives theory to date. Central to this theory is a simple question as pivotal to modern-day management as it is to economics research: What makes people act in a particular way in an economic or business situation? In seeking an answer, the authors provide the methodological tools to design institutions that can ensure good incentives for economic agents. This book focuses on the principal-agent model, the "simple" situation where a principal, or company, delegates a task to a single agent through a contract--the essence of management and contract theory. How does the owner or manager of a firm align the objectives of its various members to maximize profits?Following a brief historical overview showing how the problem of incentives has come to the fore in the past two centuries, the authors devote the bulk of their work to exploring principal-agent models and various extensions thereof in light of three types of information problems: adverse selection, moral hazard, and non-verifiability. Offering an unprecedented look at a subject vital to industrial organization, labor economics, and behavioral economics, this book is set to become the definitive resource for students, researchers, and others who might find themselves pondering what contracts, and the incentives they embody, are really all about. xi Foreword Introduction 1 1 Incentives in Economic Thought 7 1.1 Adam Smith and Incentive Contracts in Agriculture 8 1.2 Chester Barnard and Incentives in Management 11 1.3 Hume, Wicksell, Groves: The Free-Rider Problem 14 1.4 Borda, Bowen, Vickrey: Incentives in Voting 15 1.5 Leon Walras and the Regulation of Natural Monopolies 18 1.6 Knight, Arrow, Pauly: Incentives in Insurance 18 1.7 Sidgwick, Vickrey, Mirrlees: Redistribution and Incentives 20 1.8 Dupuit, Edgeworth, Pigou: Price Discrimination 22 1.9 Incentives in Planned Economies 23 1.10 Leonid Hurwicz and Mechanism Design 25 1.11 Auctions 27 2 The Rent Extraction-Efficiency Trade-Off 28 2.1 The Basic Model 32 2.2 The Complete Information Optimal Contract 33 2.3 Incentive Feasible Menu of Contracts 36 2.4 Information Rents 39 2.5 The Optimization Program of the Principal 40 2.6 The Rent Extraction-Efficiency Trade-Off 41 2.7 The Theory of the Firm Under Asymmetric Information 46 2.8 Asymmetric Information and Marginal Cost Pricing 48 2.9 The Revelation Principle 48 2.10 A More General Utility Function for the Agent 51 2.11 Ex Ante versus Ex Post Participation Constraints 57 2.12 Commitment 63 2.13 Stochastic Mechanisms 65 2.14 Informative Signals to Improve Contracting 68 2.15 Contract Theory at Work 72 Appendix 81 3 Incentive and Participation Constraints with Adverse Selection 82 3.1 More than Two Types 86 3.2 Multidimensional Asymmetric Information 93 3.3 Type-Dependent Participation Constraint and Countervailing Incentives 101 3.4 Random Participation Constraint 115 3.5 Limited Liability 118 3.6 Audit Mechanisms and Costly State Verification 121 3.7 Redistributive Concerns and the Efficiency-Equity Trade-Off 134 Appendices 130 4 Moral Hazard: The Basic Trade-Offs 145 4.1 The Model 148 4.2 Risk Neutrality and First-Best Implementation 153 4.3 The Trade-Off Between Limited Liability Rent Extraction and Efficiency 155 4.4 The Trade-Off Between Insurance and Efficiency 158 4.5 More than Two Levels of Performance 163 4.6 Informative Signals to Improve Contracting 167 4.7 Moral Hazard and the Theory of the Firm 172 4.8 Contract Theory at W Forfattere: David Martimort, Jean-Jacques Laffont Utgave: ukjent Språk: Engelsk Sidetall: 440 ISBN: 9780691091846 Vekt: 794 g Forla Princeton University Press Innbindin Heftet Utgitt: 2001 Veil. pris: 0 kr