Incentives

Contents
Preface to the Third Edition
1 Equilibrium, Efficiency, and Asymmetric Information
	1.1 Asymmetric Information
	1.2 Taxi!
	1.3 Picking a Winner
	1.4 Efficiency
	1.5 Equilibrium
	1.6 The Prisoner’s Dilemma Game
	1.7 Repetition and Equilibrium
2 Basic Models and Tools
	2.1 Maximizing a Quadratic
	∂2.2 Overview of Calculus
	2.3 Lagrangian Multipliers
	2.4 The Composite Commodity Model
	2.5 Quasi-Linear Preferences
	2.6 Decision Making Under Uncertainty
	2.7 Insurance
3 Hidden Action
	3.1 Resource Allocation
	3.2 Marketable Pollution Rights
	3.3 Incentive Regulation of the Telecommunications Industry
	3.4 The US Savings and Loan Debacle
	3.5 The Great Recession of 2007–2009
	3.6 Personal Bankruptcy
	3.7 Mandatory Retirement
	3.8 Tenure and the Performance of Professors
	3.9 University Performance in Europe and the US
	3.10 Pay and Performance in US Public Schools
	3.11 Moral Hazard and Insurance
4 Corporate Governance
	4.1 A Brief Tour of Several Countries
	4.2 Partnerships
	4.3 The Owner–Employee Relationship
	4.4 The Owner–Manager Relationship in Practice
	4.5 Agency Theory
5 Hidden Characteristics
	5.1 Price Discrimination
	5.2 Two-Person Exchange
	∂5.3 The Used-Car Market
	5.4 Credit Rationing
	∂5.5 Bundling and Product Quality
	5.6 Job-Market Signaling
	5.7 Competitive Insurance Markets
6 Auctions
	6.1 Introduction
	6.2 The Vickrey Auction and Search Engine Ad Auctions
	6.3 Four Basic Auction Mechanisms
	6.4 Revenue Equivalence
	6.5 Applications of the Revenue Equivalence Theorem
	6.6 Interdependent Values
7 Voting and Preference Revelation
	7.1 Voting Rules
	7.2 Preference Revelation in General
	7.3 General Proof of the Gibbard-Satterthwaite Theorem
	7.4 The Revelation Principle
8 Public Goods and Preference Revelation
	8.1 The Economic Model
	8.2 The Pivotal Mechanism
	8.3 Groves Mechanisms
	8.4 Efficiency and Incentive Compatibility
9 Matching
	9.1 One-To-One Matching
	9.2 School Admissions
	9.3 Hospitals and Doctors
	9.4 Allocating Dormitory Rooms
	9.5 Kidney Transplants
	9.6 Lung Transplants
10 Networks
	10.1 Graphs and Networks
	10.2 Distance-Based Payoffs
	10.3 Cournot Equilibrium
	10.4 Bilateral Trade
	10.5 R&D Networks
11 General Competitive Equilibrium
	11.1 Competition, Property Rights, and Prosperity
	11.2 The Arrow-Debreu Economy
	11.3 Nonconvex Economies
	11.4 Efficiency and Incentive Compatibility
	11.5 Common Property Resources
References
Author Index
Subject Index