Instructor: Sandeep Baliga (baliga@northwestern.edu)

Time: Tuesdays 2 p.m. (beginning Sept 28)

Lecture room: MEDS conference room 561

Moral Hazard: The static principal-agent model with moral hazard; moral hazard in teams; relative performance evaluation; justification for linear contracts; the multi-task principal agent model; common agency; dynamic principal-agent contracts; short-term versus lung-term contracts; renegotiation.

Adverse selection: The static principal agent model with adverse selection; dynamic principal agent model with full commitment, zero commitment and renegotiation.

Implementation theory: Brief statement of revelation principle; Nash implementation; subgame perfect implementation; implementation with renegotiation; Bayesian and perfect Bayesian implementation; implementation when the planner is a player.

Theory of the firm: the Grossman-Hart-Moore model of incomplete contracts; foundations for incomplete contracts; mechanism design with collusion.

Grade: Based on 5 problem sets.

Recommendation: I also recommend Asher Wolinsky’s course on Information Economics where he will teach adverse selection models, auctions and public good models I may not cover in this class.