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Sequential optimal contracting in continuous time

Author

Listed:
  • Guillermo Alonso Alvarez
  • Erhan Bayraktar
  • Ibrahim Ekren
  • Liwei Huang

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.

Suggested Citation

  • Guillermo Alonso Alvarez & Erhan Bayraktar & Ibrahim Ekren & Liwei Huang, 2024. "Sequential optimal contracting in continuous time," Papers 2411.04262, arXiv.org.
    • Handle: RePEc:arx:papers:2411.04262
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    References listed on IDEAS

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