Simon Fraser University
Engaging the World

Course Outlines

Spring 2026 - ECON 826 G100

Applied Contract Theory (4)

Class Number: 4084

Delivery Method: In Person

Overview

  • Course Times + Location:

    Jan 5 – Apr 10, 2026: Fri, 10:30 a.m.–1:30 p.m.
    Burnaby

Description

CALENDAR DESCRIPTION:

Contract theory and its applications, with a focus on principal-agent theory, the theory of property rights, and incomplete contracting.

COURSE DETAILS:

This course introduces basic concepts for an understanding of  the internal organization of firms. Agency theory considers situations where an entrepreneur (“principal”) does not operate the firm on her own but hires workers and managers (“agents’’) to perform specific tasks. We then ask how the principal should structure the contractual relationship with her agents, in particular, to elicit private information and to induce appropriate effort. Subsequently, we explain why `incomplete contracting’ is a tool to develop meaningful theories of firm ownership, and explore optimal governance structures for a variety of specific economic examples.

 

A sketchy overview of topics covered is as follows.

 

  1. Agency Theory: Incomplete Information and Moral Hazard
  2. Transaction Costs and Property-Rights Theory
  3. The Theory of the Firm and Incomplete Contracting
  4. Some Ideas on a Foundation of Incomplete Contracts

Some more advanced game-theoretical tools and concepts will be developed in class as needed. Students are expected to have a solid knowledge of basic calculus.

 

Grading

NOTES:

Grading will be based on assignments (30%), a midterm paper (30%) and the final exam (40%).

Materials

REQUIRED READING:

No single textbook covers the entirety of topics. We will partly rely on

 

Patrick Bolton and Mathias Dewatripont: Contract Theory, MIT, 2005.

Oliver Hart: Firms, Contracts and Financial Structure, Oxford University Press, 1995.

The relevant parts of these books and some original papers to be discussed in class will be placed on reserve.


REQUIRED READING NOTES:

Your personalized Course Material list, including digital and physical textbooks, are available through the SFU Bookstore website by simply entering your Computing ID at: shop.sfu.ca/course-materials/my-personalized-course-materials.

Graduate Studies Notes:

Important dates and deadlines for graduate students are found here: http://www.sfu.ca/dean-gradstudies/current/important_dates/guidelines.html. The deadline to drop a course with a 100% refund is the end of week 2. The deadline to drop with no notation on your transcript is the end of week 3.

Registrar Notes:

ACADEMIC INTEGRITY: YOUR WORK, YOUR SUCCESS

At SFU, you are expected to act honestly and responsibly in all your academic work. Cheating, plagiarism, or any other form of academic dishonesty harms your own learning, undermines the efforts of your classmates who pursue their studies honestly, and goes against the core values of the university.

To learn more about the academic disciplinary process and relevant academic supports, visit: 


RELIGIOUS ACCOMMODATION

Students with a faith background who may need accommodations during the term are encouraged to assess their needs as soon as possible and review the Multifaith religious accommodations website. The page outlines ways they begin working toward an accommodation and ensure solutions can be reached in a timely fashion.