I am pleased to report that the second edition of my "Economics of Contracts: A Primer" has just been published by MIT Press. This is what they say about it:

The theory of contracts grew out of the failure of the general equilibrium model to account for the strategic interactions among agents that arise from informational asymmetries. This popular text, revised and updated throughout for the second edition, serves as a concise and rigorous introduction to the theory of contracts for graduate students and professional economists. The book presents the main models of the theory of contracts, particularly the basic models of adverse selection, signaling, and moral hazard. It emphasizes the methods used to analyze the models, but also includes brief introductions to many of the applications in different fields of economics. The goal is to give readers the tools to understand the basic models and create their own.

For the second edition, major changes have been made to chapter 3, on examples and extensions for the adverse selection model, which now includes more thorough discussions of multiprincipals, collusion, and multidimensional adverse selection, and to chapter 5, on moral hazard, with the limited liability model, career concerns, and common agency added to its topics. Two chapters have been completely rewritten: chapter 7, on the theory of incomplete contracts, and chapter 8, on the empirical literature in the theory of contracts. An appendix presents concepts of noncooperative game theory to supplement chapters 4 and 6. Exercises follow chapters 2 through 5.


Some kind people also report on the second edition:

  • Roger Guesnerie:
    Salaniť provides a broad overview of the theory of contracts. Concision and clarity make the book an elegant introduction for newcomers. But it is also a useful reference for experienced students and researchers.
  • Paul Milgrom:
    Salaniť has written an elegant book, concise in its explanations and tightly focused on the most useful models and results of contract theory. His experience in both theory building and theory testing are plain to see in his sure-handed choices, which separate the chaff from the wheat in this huge and growing body of theory. I recommend this book highly to students and newcomers to the economic theory of contracts.
  • Patrick Rey:
    The first edition of Salaniť's book provided an insightful introduction to the modern theory of incentives and contracts. This second edition keeps up with recent advances while maintaining the emphasis on key ideas and intuitions. A great read.

    You can buy the second edition from MIT Press directly, or from Amazon:

    in the US ;

    in the UK ;

    in France ;

    in Germany ;

    and in Japan.



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