Contracting for Coordination

Abstract

A principal contracts with agents to achieve coordination. Multiple equilibria can in general arise under given contract offers, and the principal wishes to maximize her payoff guarantee across equilibrium outcomes. I discuss recent work on contracting for coordination using a simple, unifying framework. The analysis reveals how the principal's concern for strategic uncertainty shapes optimal contracts, with implications for discrimination and inequality between agents. I adapt the framework to various settings - including contractible actions, hidden actions, and hidden information - and highlight the relevance of contracting for coordination in applications - including adoption and investment, team incentives, and goods with network externalities.