Related papers: Contracting with discretionary bonuses
We consider a general formulation of the random horizon Principal-Agent problem with a continuous payment and a lump-sum payment at termination. In the European version of the problem, the random horizon is chosen solely by the principal…
In this article, we employ a principal-agent model to analyze optimal contract design in a monopolistic reinsurance market under adverse selection with a continuum of insurer types. Instead of using the classical expected utility framework,…
Firms have access to abundant data on market participants. They use these data to target contracts to agents with specific characteristics, and describe these contracts in opaque terms. In response to such practices, recent proposed…
We study principal-agent problems where a farsighted agent takes costly actions in an MDP. The core challenge in these settings is that agent's actions are hidden to the principal, who can only observe their outcomes, namely state…
In this paper, we consider a problem of contract theory in which several Principals hire a common Agent and we study the model in the continuous time setting. We show that optimal contracts should satisfy some equilibrium conditions and we…
We study an optimal stopping problem with an unbounded, time-dependent and discontinuous reward function. This problem is motivated by the pricing of a variable annuity contract with guaranteed minimum maturity benefit, under the assumption…
In a decision-making scenario, a principal could use conditional predictions from an expert agent to inform their choice. However, this approach would introduce a fundamental conflict of interest. An agent optimizing for predictive accuracy…
We investigate an optimal reinsurance problem for an insurance company facing a constant fixed cost when the reinsurance contract is signed. The insurer needs to optimally choose both the starting time of the reinsurance contract and the…
We present a continuous-time contract whereby a top-level player can incentivize a hierarchy of players below him to act in his best interest despite only observing the output of his direct subordinate. This paper extends Sannikov's…
This article studies the problem of evaluating the information that a Principal lacks when establishing an incentive contract with an Agent whose effort is not observable. The Principal ("she") pays a continuous rent to the Agent ("he"),…
We study multi-agent contracts, in which a principal delegates a task to multiple agents and incentivizes them to exert effort. Prior research has mostly focused on maximizing the principal's utility, often resulting in highly disparate…
Principal-agent problems arise when one party acts on behalf of another, leading to conflicts of interest. The economic literature has extensively studied principal-agent problems, and recent work has extended this to more complex scenarios…
We study the design of optimal incentives in sequential processes. To do so, we consider a basic and fundamental model in which an agent initiates a value-creating sequential process through costly investment with random success. If…
We study a general class of Principal-Agent problems in continuous time under hidden action. By formulating the model as a coupled stochastic optimal control problem we are able to find a set of necessary conditions characterizing optimal…
A principal funds a multistage project and retains the right to cut the funding if it stagnates at some point. An agent wants to convince the principal to fund the project as long as possible, and can design the flow of information about…
In this paper, we study moral hazard problems in contract theory by adding an exogenous Planner to manage the actions of Agents hired by a Principal. We provide conditions ensuring that Pareto optima exist for the Agents using the…
We propose to study electricity capacity remuneration mechanism design through a Principal-Agent approach. The Principal represents the aggregation of electricity consumers (or a representative entity), subject to the physical risk of…
This paper considers dynamic moral hazard settings, in which the consequences of the agent's actions are not precisely understood. In a new continuous-time moral hazard model with drift ambiguity, the agent's unobservable action translates…
We propose a model in which dividend payments occur at regular, deterministic intervals in an otherwise continuous model. This contrasts traditional models where either the payment of continuous dividends is controlled or the dynamics are…
I study dynamic contracting where Sender privately observes a Markovian state and seeks to motivate Receiver, who acts. Sender provides incentives in two ways: payments, which alter payoffs ex-post, and (Bayesian) persuasion, which shapes…