First, a contract helps the two sides of the deal work together over a long period of time. Contract theory helps us understand these problems. Hart has similarly written seminal papers on using contract theory in mergers, acquisitions, corporate ownership and vertical integration. The fact that the 2016 Nobel Prize in economics has gone to two giants of contract theory tells us something else as well. Since 1991, 22 economists have been awarded Nobel Prizes for their work in the overlapping fields of new institutional economics, game theory, industrial organization, contract theory and information asymmetry.

Source: Mint October 10, 2016 12:45 UTC