Bengt Holmström

Bengt Holmström is a Finnish economist whose research on incentives, contracts, and corporate governance helped shape modern contract theory. He shared the 2016 Nobel Memorial Prize in Economic Sciences with Oliver Hart.

Principal–agent problem: A problem in which one party delegates work to another whose actions are difficult to observe. This framework anchors Holmström’s analysis of how contracts align employers’ and workers’ incentives.
Informativeness principle: A contract-design result that says useful signals of an agent’s action should inform compensation. Holmström derived this principle to identify when performance measures improve incentives.
Oliver Hart: A British-American economist known for research on incomplete contracts and corporate boundaries. Hart shared the 2016 economics prize with Holmström for contributions to contract theory.
Executive compensation: The pay and benefits awarded to senior corporate managers. Holmström analyzed how compensation can reward value creation without encouraging excessive risk.
2016 Nobel Memorial Prize in Economic Sciences: The economics prize awarded to Oliver Hart and Bengt Holmström for contributions to contract theory. The award recognized Holmström’s foundational work on contracts and incentives.
Moral hazard: A situation in which protection from risk changes behavior in ways that increase the chance or cost of loss. Holmström studied how hidden actions create moral hazard in insurance and employment.
Holmström’s team theory: A theory of incentives in teams where individual contributions cannot be perfectly separated. It explains why shared output alone may fail to reward members for their own effort.
Paul Milgrom: An American economist known for research on auctions, market design, and organizational incentives. Milgrom collaborated with Holmström on multitask incentives and the theory of the firm.
Corporate governance: The systems that direct, monitor, and hold accountable the leaders of corporations. His work connects contract design with the allocation of control inside firms.
Incomplete contracts: Contracts that leave some future contingencies unspecified because they cannot be fully anticipated or described. Holmström’s work helped establish incomplete contracting as a central lens on firm organization.

Linked from 2 pages