Michael Sykuta
U. of Missouri-Columbia

Sykuta

Homepage

(Thursday, 1st January 2004)

Title : The Econometric of Contracts

Empirical research on contracts spans a variety of issues, including the boundary of the firm, the duration of contractual relations, and the structure of incentive systems with particular emphasis on pricing structures. Masten and Saussier (2002) provide a cursory overview of the theoretical frameworks that under gird much of this research and the supporting empirical research. In the process, they point to the potential convergence of the theoretical literature. Mahoney (1992) provides a framework from which to build a more integrated theory of contract that also generates testable hypotheses like unto those discussed by Masten and Saussier. Sykuta and Parcell (2003) extend Mahoney's framework with a broader understanding of the fundamental elements of contract design.

In addition to challenges of the theoretical underpinnings, empirical research on contracts is confounded by a difficulty in collecting contracts or data on contracts, the multidimensional nature of transactions, and problems of measurement key dimensions of transactions and the development of appropriate proxies for qualitative concepts. These challenges also call for more sophisticated econometric techniques to address the nature of the data and the issue of sample selection.

This workshop will provide an overview of each of these issues, drawing from review articles of empirical research as well as specific examples of econometric analyses of contracts and contracting problems. In the process, participants will be encouraged to discuss innovative alternate measures and techniques to address lingering challenges in the literature.

Bibliographical references :

Must read reference : Masten, Scott and Stéphane Saussier (2002), "The Econometrics of Contracts: An Assessment of Developments in the Empirical Literature on Contracting," in The Economics of Contracts: Theory and Application, E. Brousseau and J-M. Glachant, ed., Cambridge - (working paper version).

Mahoney, Joseph (1992), "The Choice of Organizational Form: Vertical Financial Ownership Versus Other Methods of Vertical Integration," Strategic Management Journal 13:559-584.

Sykuta, Michael and Joseph Parcell (2003), "Contract Structure and Design in Identity Preserved Soybean Production," Review of Agricultural Economics 25(2):332-350, (working paper version).

Anderson, Christopher (1999), "Financial Contracting under Extreme Uncertainty: An Analysis of Brazilian Corporate Debentures," Journal of Financial Economics 51(1): 45-84.
Link at IDEAS

Mayer, Kyle, and Jackson Nickerson (2002), “Antecedents and Performance Implications of Contracting for Knowledge Workers: Evidence from Information Technology Services,” Working Paper, Olin School of Business , Washington University.

Extended list of references for later reading.