(Friday, 23rd May 2008)
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The delivery of goods and services between two parties is governed by one kind of institutional arrangement or another, typically involving some form of explicit contract for delivery and payment, or some kind of implicit agreement on how the relationship will proceed over time. The key behind any such contractual governance structure is to find ways to align the incentives of both parties in order to maximize the gains from trade and minimize the potential for wasteful conflict. In this session we will cover some of the central ideas from agency theory and transaction cost economics to emphasize some of the main trade-offs that different governance structures impose on the relationship between such two parties.
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