Reflections on the 2016 Nobel Memorial Prize for contract theory (Oliver Hart and Bengt Holmström)
Keywords:Nicolai J. Foss, Peter G. Klein, Oliver Hart, Bengt Holmstrom, Nobel, economics
We briefly summarize the contributions of Oliver Hart and Bengt Holmström, two key founders of modern contract theory, and describe their significance for the analysis of organizations and institutions. We then discuss the foundations of modern contract theory and review some criticisms related to modeling strategy, assumptions about knowledge and cognition, and relevance. We conclude with some suggestions for advancing contract theory in a world of uncertainty, complexity, and entrepreneurship.