Optimal contracts under competition when uncertainty from adverse selection and moral hazard are present
Portfolio Management
2018-07-31 v1 Theoretical Economics
Abstract
In a continuous-time setting where a risk-averse agent controls the drift of an output process driven by a Brownian motion, optimal contracts are linear in the terminal output; this result is well-known in a setting with moral hazard and -under stronger assumptions - adverse selection. We show that this result continues to hold when in addition reservation utilities are type-dependent. This type of problem occurs in the study of optimal compensation problems involving competing principals.
Keywords
Cite
@article{arxiv.1801.04080,
title = {Optimal contracts under competition when uncertainty from adverse selection and moral hazard are present},
author = {N. Packham},
journal= {arXiv preprint arXiv:1801.04080},
year = {2018}
}