Oliver Hart and Bengt Holmstrom were on 10 October 2016 awarded the 2016 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their contributions to contract theory.
●    They have developed a contract theory, a comprehensive framework for analysing many diverse issues in contractual design, like performance-based pay for top executives, deductibles and co-pays in insurance and the privatization of public-sector activities.
●    The new theoretical tools created by Hart and Holmstrom are valuable to the understanding of real-life contracts and institutions, as well as potential pitfalls in contract design.
●    In the late 1970s, Bengt Holmstrom demonstrated how a principal should design an optimal contract for an agent, whose action is partly unobserved by the principal. 
●    Holmström’s informativeness principle stated precisely how this contract should link the agent’s pay to performance-relevant information. 

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