The Principal-Agent Problem With Time Inconsistent Utility Functions
Optimization and Control
2015-03-19 v1 Probability
Economics
Abstract
In this paper we study a generalization of the continuous time Principal-Agent problem allowing for time inconsistent utility functions, for instance of mean-variance type. Using recent results on the Pontryagin maximum principle for FBSDEs we suggest a method of characterizing optimal contracts for such models. To illustrate this we consider a fully solved explicit example in the linear quadratic setting.
Keywords
Cite
@article{arxiv.1503.05416,
title = {The Principal-Agent Problem With Time Inconsistent Utility Functions},
author = {Boualem Djehiche and Peter Helgesson},
journal= {arXiv preprint arXiv:1503.05416},
year = {2015}
}
Comments
arXiv admin note: substantial text overlap with arXiv:1410.6392