Campbell, Arthur; Ederer, Florian; Spinnewijn, Johannes; Cohen, Moshe

Solutions Manual for Contract Theory

Preface xi Introduction 1(2) Hidden Information, Screening 3(12) Question 1 3(1) Question 2 3(1) Question 3 4(3) Characterization of First-Best Solution 4(1) Two Types 5(1) Continuum of Types 5(2) Question 4 7(1) Question 5 7(8) Entrepreneur's Utility 8(1) First-Best Solution 8(1) Second-Best Solution 9(1) Binding Constraints 10(1) Low-Type Allocation 11(1) Full Screening Problem 11(1) Discussion 12(1) Competition 12(3) Hidden Information, Signaling 15(8) Question 6 15(1) Question 7 15(1) Question 8 16(2) Both Types Invest 16(1) Only Bad Firms Invest 17(1) Wasteful Advertising 17(1) Question 9 18(5) No Costs of Financial Distress 18(2) Costs of Financial Distress 20(3) Hidden Action, Moral Hazard 23(12) Question 10 23(1) Randomizing Scheme Cannot Be Optimal 23(1) Question 11 24(1) Question 12 24(1) Question 13 25(2) CEO Compensation 25(1) Comparison 26(1) Question 14 27(1) Question 15 27(4) Self-Financing 28(1) Debt-Financing 28(2) Equity-Financing 30(1) Question 16 31(4) Posttakeover Value 31(1) Bid Price 32(1) Second Best Contract 32(1) First Best Contract 33(2) Disclosure of Private Information 35(8) Question 17 35(1) Question 18 35(3) Ex-Post Payoffs 36(1) Comparison of Disclosure Regimes 37(1) Voluntary Disclosure 38(1) Question 19 38(3) Unique Optimal Contract 38(2) Optimal Random Verification 40(1) Optimal Contract with Risk Averse Entrepreneur 41(1) Question 20 41(2) Multidimensional Incentive Problems 43(16) Question 21 43(1) Question 22 44(3) First-Best Outcome 45(1) Linear Contracts 45(2) Question 23 47(10) First-Best Solution 48(5) Evidence-Based Rewards 53(1) Decision-Based Rewards 54(2) Information Disclosure 56(1) Question 24 57(2) Bilateral Trading and Auctions 59(10) Question 25 59(1) Question 26 60(3) IC and IR Constraints 60(1) Efficient Trade 61(1) Comparison with Myerson-Satterthwaite Theorem 62(1) Question 27 63(1) Question 28 63(1) Question 29 63(6) Expected Payoff 64(1) Standard Auctions 65(1) Optimal Auction 66(1) Uniform Distribution 66(3) Multiagent Moral Hazard and Collusion 69(12) Question 30 69(3) Attaining the First Best Under Risk Neutrality 70(1) Risk Aversion 71(1) Question 31 72(1) Question 32 73(6) Optimal Side Contract 74(1) Restriction to Collusion-Proof Contracts 75(1) Optimal Collusion-Proof Contract 75(2) Collusion Impossible 77(2) Question 33 79(2) Dynamic Adverse Selection 81(8) Question 34 81(1) Question 35 82(2) Full Commitment 82(2) No Commitment 84(1) Question 36 84(3) Pure Adverse Selection 85(1) Adverse Selection & Moral Hazard 86(1) Question 37 87(2) Dynamic Moral Hazard 89(10) Question 38 89(1) Question 39 89(4) Debt Equals Cash Flow 91(1) Relaxing the Constraint 91(1) Optimal Values of Debt 91(1) Random First-Period Cash Flow 92(1) Known New Investment Return 92(1) Need for Short-Term Risky Debt 93(1) Question 40 93(6) Characterization of Rational-Expectations Equilibrium 94(1) First-Period Allocation 95(1) Positive Return of Firm-Specific Project 95(4) Incomplete Contracts 99(14) Question 41 99(1) Question 42 100(4) First-Best Allocation of Assets and Investment Levels 101(1) Optimal Asset Ownership 101(2) Comparison 103(1) Ex Post Bargaining with an Outside Option 103(1) Question 43 104(1) Question 44 105(8) Feasibility Constraints 106(4) Optimal Control Structures 110(2) Comparison with Aghion & Bolton (1992) 112(1) Unverifiable Information Contracting 113(18) Question 45 113(1) Question 46 114(1) Question 47 114(1) Question 48 115(1) Question 49 115(6) First-Best Solution 116(1) No Initial Contract 116(1) Single-Pair contract 117(1) At-Will-Contracting Provision 118(2) No Direct Externalities 120(1) Question 50 121(4) First-Best Outcome 122(1) Null Contract with Renegotiation 122(1) No Renegotiation 123(1) Contracting with Renegotiation 123(2) Discussion 125(1) Question 51 125(6) Aghion-Tirole with Quadratic Effort Costs 125(2) Strong Conflict of Interest 127(1) Random Choice of Project 128(3) Markets and Contracts 131(8) Question 52 131(3) Observable and Contractible Action 131(1) Unobservable or Non-Contractible Action 132(1) Common Agency 133(1) Question 53 134(1) Question 54 134(5) First-Best Solution 135(1) Joint Contract 135(1) Common Agency 136(1) Comparison and Discussion 137(2) Bibliography 139