The economics of contracts analyzes economic relationships and contractual mechanisms in the presence of asymmetric information among trading agents. Generally, in many markets, such as labour, goods and financial markets, trading involves agents with different information: for instance, entrepre-neurs do not perfectly observe talents and efforts of their employees, buyers do not know the quality of the goods before purchasing, banks are not fully informed on the investment projects of the firms to which they lend money, etc. The course aims at providing an introduction to the theoretical insights for understanding incentive (formal and informal) contracts and mechanisms used to overcome issues connected with the presence of information asymmetries among economic agents, the role of economic institutions in this context and the effects on markets equilibria.
Syllabus: Contracts − Asymmetric information − Incentives − Adverse selection − Moral hazard − Institutions.