Characterization of a Risk Sharing Contract with One-Sided Commitment

In this paper I provide a stopping-time-based solution to a long-term contracting problem between a risk-neutral principal and a risk-averse agent. The agent faces a stochastic income stream and cannot commit to the long-term contracting relationship. To compute the optimal contract, I also design an algorithm that is more efficient than value-function iteration.

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Year of publication:	2012-11
Authors:	Zhang, Yuzhe
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	Limited commitment \| Risk sharing \| Stopping time \| Value-function iteration

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Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Classification:	D86 - Economics of Contract: Theory ; C63 - Computational Techniques
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011111833