Incomplete Contracts and Control

摘要

The work on incomplete contracts cited by the prize committee began in the summer of 1983, but it may be useful to say a bit about how I reached that point. As a graduate student, first at the University of Warwick and then at Princeton University, with a degree in mathematics behind me, I was drawn to general equilibrium theory, and my PhD thesis was on general equilibrium theory with incomplete markets. Although I ended up focusing on optimality and existence problems that could arise even in exchange economies, one of my primary interests was the theory of production. In a complete markets, Arrow-Debreu economy with perfect competition, it makes sense for a firm to maximize profit or net market value. But with incomplete markets, what is the generalization of this goal? More fundamentally, what happens if shareholders disagree about what the firm should do?