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.