Prof Gilat Levy 32L.4.31 and Prof Philippe Aghion 32L.2.02

This course is available on the MPhil/PhD in Accounting, MSc in Econometrics and Mathematical Economics, MSc in Economics, MSc in Economics (2 Year Programme) and MSc in Environmental Economics and Climate Change. This course is available with permission as an outside option to students on other programmes where regulations permit.

Students on the MSc Econometrics and Mathematical Economics programme must have completed the Pre-sessional Course for MSc EME (EC451).

All other students must have completed the Introductory Course in Mathematics and Statistics (EC400).

In very exceptional circumstances, students may take this course without EC400 provided they meet the necessary requirements and have received approval from the course conveners (via a face to face meeting), the MSc Economics Programme Director and their own Programme Director. Contact the Department of Economics for more information (econ.msc@lse.ac.uk).

The course will cover topics from : contract theory, incomplete contracts, the economics of moral hazard and adverse selection in strategic settings,  dynamic theory of incentive contracts (efficiency of long-run relationships, short-term versus long-term contracts and renegotiation, static mechanism design and self-selection contracts (revelation principle for Baynesian-Nash and dominant strategy equilibria, static screening contracts) with applications to non-linear pricing, optimal auctions and regulation, and the theory of mechanism design with multiple agents (multiple agents screening and common agency).

20 hours of lectures and 10 hours of seminars in the MT. 20 hours of lectures and 10 hours of seminars in the LT.

Two marked assignments per term.

No one book covers the entire syllabus; a list of references will be provided at the start of the course. The following textbooks provide a treatment of part of the material presented in the course: Jean-Jacques Laffont, The Economics of Uncertainty and Information, MIT Press; D Fudenberg & J Tirole, Game Theory, MIT Press; Jean-Jacques Laffont & Jean Tirole, A Theory of Incentives in Procurement Regulations, MIT Press; Bernard Salanié, The Economics of Contracts: A Primer, MIT Press, Bolton, P., and M. Dewatripont (2005), Contract Theory, MIT Press, Hart, O. (1995), Firms, Contracts, and Financial Structure, Oxford University Press.

Assessment path 1
Exam (50%, duration: 2 hours) in the LT week 0.
Exam (50%, duration: 2 hours) in the main exam period.

Assessment path 2
Exam (25%, duration: 2 hours) in the LT week 0.
Exam (25%, duration: 2 hours) in the main exam period.
Essay (50%, 6000 words) in the ST.

MSc Econometrics and Mathematical Economics students must follow Assessment path 1.

Non-MSc Econometrics and Mathematical Economics students must follow Assessment path 2.