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Oliver Hart and Bengt Holmström: Contract Theory

Nobel Prize Committee
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No 2016-1, Nobel Prize in Economics documents from Nobel Prize Committee

Abstract: An eternal obstacle to human cooperation is that people have di§erent interests. In modern societies, conflicts of interests are often mitigated -- if not completely resolved -- by contractual arrangements. Well-designed contracts provide incentives for the contracting parties to exploit the prospective gains from cooperation. For example, labor contracts include pay and promotion conditions that are designed to retain and motivate employees; insurance contracts combine the sharing of risk with deductibles and co-payments to encourage clients to exercise caution; credit contracts specify payments and decision rights aimed at protecting the lender, while encouraging sound decisions by borrowers.

Keywords: Contract theory (search for similar items in EconPapers)
JEL-codes: D86 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-mic
Date: 2016-10-10
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