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:	2013
Authors:	Zhang, Yuzhe
Published in:	Journal of Economic Dynamics and Control. - Elsevier, ISSN 0165-1889. - Vol. 37.2013, 4, p. 794-809
Publisher:	Elsevier
Subject:	Limited commitment \| Risk sharing \| Stopping time \| Value-function iteration

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Type of publication:	Article
Classification:	C63 - Computational Techniques ; D82 - Asymmetric and Private Information ; D86 - Economics of Contract: Theory
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010617144