Sequential optimal contracting in continuous time
Optimization and Control
2024-11-08 v1 Theoretical Economics
Probability
Abstract
In this paper we study a principal-agent problem in continuous time with multiple lump-sum payments (contracts) paid at different deterministic times. We reduce the non-zero sum Stackelberg game between the principal and agent to a standard stochastic optimal control problem. We apply our result to a benchmark model for which we investigate how different inputs (payment frequencies, payments' distribution, discounting factors, agent's reservation utility) affect the principal's value and agent's optimal compensations.
Keywords
Cite
@article{arxiv.2411.04262,
title = {Sequential optimal contracting in continuous time},
author = {Guillermo Alonso Alvarez and Erhan Bayraktar and Ibrahim Ekren and Liwei Huang},
journal= {arXiv preprint arXiv:2411.04262},
year = {2024}
}