Related papers: On the Failures of Bonus Plans

This paper investigates the robust {non-zero-sum} games in an aggregated {overfunded} defined benefit (abbr. DB) pension plan. The sponsoring firm is concerned with the investment performance of the fund surplus while the participants act…

We study how to optimally design selection mechanisms, accounting for agents' investment incentives. A principal wishes to allocate a resource of homogeneous quality to a heterogeneous population of agents. The principal commits to a…

Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…

The role of a market maker is to simultaneously offer to buy and sell quantities of goods, often a financial asset such as a share, at specified prices. An automated market maker (AMM) is a mechanism that offers to trade according to some…

We study investment strategy in different models of financial markets, where the investors cannot reach a perfect knowledge about available assets. The investor spends a certain effort to get information; this allows him to better choose…

This paper considers the optimal management structure about hiring a manager and providing the manager with a separate salary and bonus using a relational contract among an owner, a manager, and workers, assuming that the manager can…

We study a model of a corporation which has the possibility to choose various production/business policies with different expected profits and risks. In the model there are restrictions on the dividend distribution rates as well as…

We study the optimal asset allocation problem for a fund manager whose compensation depends on the performance of her portfolio with respect to a benchmark. The objective of the manager is to maximise the expected utility of her final…

We consider a social planner faced with a stream of myopic selfish agents. The goal of the social planner is to maximize the social welfare, however, it is limited to using only information asymmetry (regarding previous outcomes) and cannot…

A decision maker repeatedly chooses one of a finite set of actions. In each period, the decision maker's payoff depends on fixed basic payoff of the chosen action and the frequency with which the action has been chosen in the past. We…

We consider an optimal stochastic control problem in which a firm's cash/surplus process is controlled by dividend payments and capital injections. Stockholders aim to maximize their dividend stream minus the cost of injecting capital, if…

We present a method for a certain class of Markov Decision Processes (MDPs) that can relate the optimal policy back to one or more reward sources in the environment. For a given initial state, without fully computing the value function,…

This paper studies optimal contract design in private market investing, focusing on internal decision making in venture capital and private equity firms. A principal relies on an agent who privately exerts costly due diligence effort and…

We consider a discrete-time, generically incomplete market model and a behavioural investor with power-like utility and distortion functions. The existence of optimal strategies in this setting has been shown in a previous paper under…

A competitive market is modeled as a game of incomplete information. One player observes some payoff-relevant state and can sell (possibly noisy) messages thereof to the other, whose willingness to pay is contingent on their own beliefs. We…

We consider an arbitrage-free, discrete time and frictionless market. We prove that an investor maximising the expected utility of her terminal wealth can always find an optimal investment strategy provided that her dissatisfaction of…

Commercial entries, such as hotels, are ranked according to score by a search engine or recommendation system, and the score of each can be improved upon by making a targeted investment, e.g., advertising. We study the problem of how a…

We are witnessing an increasing use of data-driven predictive models to inform decisions. As decisions have implications for individuals and society, there is increasing pressure on decision makers to be transparent about their decision…

The design of data markets has gained importance as firms increasingly use machine learning models fueled by externally acquired training data. A key consideration is the externalities firms face when data, though inherently freely…

Decision markets are mechanisms for selecting one among a set of actions based on forecasts about their consequences. Decision markets that are based on scoring rules have been proven to offer incentive compatibility analogous to properly…