Contract theory won the Nobel Prize in EconomicsWhat is contract theory

"Contract theory" is the study of a particular transaction environment to analyze the economic behavior and results between different contractors, often need to simplify the transaction attributes to a certain extent through the assumption of conditions, the establishment of models to analyze and derive theoretical ideas. "Contract theory" is also one of the rapidly developing branches of economics in the past 30 years, has been in the process of non-stop integration.

The Nobel website also explains that "contract theory" is used to address questions like: Should providers of public **** services like schools, hospitals and prisons be state-owned or privately owned? Should teachers, doctors and prison guards be paid a fixed salary or performance-based pay? How much of the income of business executives should come from bonuses and how much from stock options?