CALTECH                                          

SS 211  Course Web page: SYLLABUS                                                                                               

Announcements                                                                               
Syllabus
Homeworks and Exams
Readings



SYLLABUS:

Instructor: Jaksa  Cvitanic, 137 Baxter,  x1784, cvitanic@hss.caltech.edu
Office Hours: Monday 3:30-4:00PM or by appointment.
Class meetings:  Mo,Wed. First meeting Monday, 27 March, 2:00PM, 315 Baxter.


Prerequisites: A solid knowledge of  probability. Some knowledge on Brownian motion models
desirable, as well as basic microeconomics.

Grading:  100% project or presentation.

Content and Goals: The topic of this course is  finding optimal incentive contracts (optimal compensation)
in various economic situations. We will start with basic principal-agent models in a single-period
setting: first best (full information), second best (hidden information/moral hazard) and third best
 (hidden type/adverse selection). We will then consider the same problems in the continuous-time
setting, including applications to the compensation of executives and portfolio managers.
Latter part of the course will consist of students presentations of recent  papers in the field..

Some advanced books in this field are:

The Economics of Contracts: A Primer : Second Edition
by Bernard Salanie
ISBN: 0262195259

Contract Theory
by Patrick Bolton, Mathias Dewatripont
ISBN: 0262025760

The Theory of Incentives : The Principal-Agent Model
by Jean-Jacques Laffont, David Martimort
ISBN: 0691091846

We will mostlly follow Salanie in the beginning part of the course.