Research at the Chair of Microeconomics is mainly focussed on contract theory, i.e. the design and effects of incentives, as an innovative branch of microeconomic theory. More specifically, research activities are conducted in the following three subfields:

• Dynamic contract theory: repeated multilateral interactions with asymmetric information are common in many real-life situations. By formally analysing such situations, it is possible to gain insights into the effectiveness and potential failure of incentives, which has far-reaching practical implications.
• Behaviour-based contract theory: Economic actors do not always behave completely rationally, which has an impact on the design of contracts and their effectiveness. Behavioural contract theory examines the effects of behavioural phenomena such as loss aversion and time-inconsistent preferences on the incentive mechanisms implemented.
• Contract theory as a microfoundation: Financial contracts, e.g. in the banking or insurance sector, often form the basis of macroeconomic models. The design of such contracts can have significant consequences for the macro level.