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Within the Firm: Managing through Incentives

Course Number:



Undergraduate Economics


Additional Major in Economics, Additional Major in Economics and Statistics, B.A. in Economics, B.S. in Economics, B.S. in Economics and Mathematical Sciences, B.S. in Economics and Statistics, Minor in Economics

Course Description


We are living in an exciting age of information and knowledge when inspiring employees with a firm becomes increasingly more important Aligning the objectives of workers, managers, and owners by providing them with appropriate incentives becomes an emerging paradigm in the modern business world. In this course we learn how to reason about incentives both between managers and employees, managers and owners, and within a team of co-workers. We cover a broad range of topics including principle-agent problem, moral hazard, asymmetry of information, incentive in teams, collective decision making, and repeated interactions. These theoretical underpinnings will be illustrated with actual business experience and case studies. (Lecture, 3 hours). Minimum grade of "C" required in all economics pre-requisite courses.


Lecture: 160min/wk


Recommended: Edward P. Lazear, "Personal Economics for Managers", Wiley (1st Edition), 1997

Learning Objectives

At the end of the course, the students should be able to

  1. Apply tools of game theory to reason about incentives within the firm;
  2. Identify the causes of market failures inside the firm;
  3. Discuss successful business experiences and practices of managing through incentives; and
  4. Design appropriate incentive schemes in new business situations.


(21256) AND (36201) AND (73230)