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Unformatted text preview: Economics 387L. Dynamic Contracts. Spring 2007. Department of Economics, University of Texas Instructor: Dean Corbae, BRB 3.134A, (o) 512-475-8530 email: [email protected], web: www.eco.utexas.edu/˜corbae Syllabus This class will study dynamic problems in the presence of information and enforcement frictions. Generally, one may think that there are veri f- cation and enforcement technologies; the Arrow-Debreu environment where institutions like banks don’t really matter corresponds to the case where veri f cation and enforcement is costless. We begin with static contracting problems in the presence of moral hazard. Then we study the bene f ts to long term or dynamic contracting in the presence of private information but full commitment. Next we study risk sharing arrangements when agents can- not credibly commit to undertake certain actions (e.g. repay loans). Many of the techniques we will cover in the class have applications in banking and f- nancial institutions, CEO compensation, unemployment insurance, dynamic Mirrlees taxation, etc. In particular, we will end the class by studying some new research in taxation. The requirements for this class are periodic problem sets, computer as- signments, and a f nal project. The f nal project can be one of two types. First, you can write a 7 page paper which states a well-de f ned question that involves an information or enforcement problem, sets up an economic envi- ronment (speci f cation of population, preferences, technologies, information structure, and timing of play), and provides some preliminary results and/or conjectures along the lines outlined for the second year paper requirement. Second, you can empirically test a contracting problem or write a program to compute a speci f c paper assigned in section V. The following texts will be helpful (but are not required). Several copies have been ordered for the book store....
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- Spring '07
- Economics, private information, Journal of Economic Theory, costly state verification