Description: Lecture, three hours. Preparation: introductory probability. Enforced requisite: course 201C. Study of trading relationships between small number of agents. Coverage of many tools and techniques used in models of moral hazard, adverse selection, and incomplete contracting, starting with static models of moral hazard and mechanism design and development of their dynamic counterparts. Consideration of environments where agents cannot use formal contracts, studying relational contracts and trading relationships with no contracts, Analysis of wide variety of applications from industrial organization, corporate finance, personnel economics, and public economics. S/U or letter grading.

Units: 4.0