The contributions of Hart and Holmström to Contract Theory

László Kóczy () and Hubert Janos Kiss

No 1701, Working Paper Series from Óbuda University, Keleti Faculty of Business and Management

Abstract: The 2016 Nobel Memorial Prize in Economic Sciences was awarded to Oliver Hart and Bengt Holmström for their work on contract theory. Contract theory is a subfield of game theory where the conflict between the owner - the principal - and the CEO - or agent is at the centre of interest. In the following we explain the principal-agent model of Holmström with some extensions and then look at the property right aspects of these models based on Hart's work. Although the two researchers are recognised for their theoretical work, in our simple introduction we avoid complex formulae and illustrate the models with examples.

Keywords: contract theory; incentives; principal-agent problem; Nobel prize; risk; property rights JEL Codes: C72; D82; D86 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2017
New Economics Papers: this item is included in nep-cta, nep-gth, nep-his, nep-hpe, nep-hrm and nep-mic
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