• Table of Contents
    • Abstract
    • Keywords
    • Article
      • Adverse selection
        • Direct extensions
        • Multi-agent organizations
        • Dynamics
        • Applications
      • Moral hazard
        • Risk neutrality
        • Risk aversion
        • Extensions
        • Multi-agent organizations
        • Dynamics
      • Non-verifiability
        • Extensions
    • See Also
    • Bibliography
    • How to cite this article

contract theory

David Martimort
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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Abstract

This article offers a brief overview of contract. It focuses on the theory of complete contracts and the three associated paradigms of adverse selection, moral hazard and non-verifiability. By showing difficulties in allocating resources between asymmetrically informed partners, contract theory has deeply changed our view of the functioning of organizations and markets.
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Keywords

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Article

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See Also

I thank D. Gromb and J. Pouyet for helpful comments on an earlier version.
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How to cite this article

Martimort, David. "contract theory." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 22 July 2014 <http://www.dictionaryofeconomics.com/article?id=pde2008_C000340> doi:10.1057/9780230226203.0309

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