Contracts, Information and Incentives in Organizations

2022/2023

Academic Year

ENG

Instruction in English

6

ECTS credits

Delivered at:

HSE/NES Undergraduate Programmes Curriculum Support

Course type:

Elective course

When:

4 year, 3, 4 module

Instructor

Mayskaya, Tatiana

Course Syllabus

Abstract

The first part of this course provides an introduction to the Economics of Information. This field was a revolution in economics, overturning long standing presumptions, including the one of market efficiency. This had deep implications for economic policy. Economics of Information looks at situations where one of the contracting parties have private information. We will focus on settings with two parties: a principal (e.g. firm owner) and an agent (e.g. worker). The principal delegates a task to the agent who will obtain some private information as a result. This private information can be of two types: either the agent can take a hidden action (known as moral hazard); or the agent has some private knowledge (known as adverse selection). How should the principal cope with this situation? In the context of organizations, we will see how firm’s owners succeed in aligning the objectives of its various members, such as workers, supervisors, and managers, with profit maximization. The second part of the course revolves around the Economics of Organizations. Neoclassical economics traditionally viewed a firm as a production set. Given market prices, the firm chooses a set of inputs to buy, turns them into outputs, and then sells those outputs on the market in order to maximize profits. This "black box" view of the firm captures many important aspects of what a firm does, but leaves many questions unanswered: why do firms exist?, why some firms decide to buy inputs and others to make them?, what do managers do?, what is the role of hierarchy?, why do firms often appear dysfunctional?, why do inefficient and efficient firms coexist?, should we care about their coexistence? The purpose of this course is to move beyond the Neoclassical view of the firm and to provide you with a set of models that you can use as a first step when thinking about modern