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—the theory of recursive contracts. Recursive formulations allow us to reduce often complex models to a sequence of essentially … of the basic theory: the Revelation Principle, formulating and simplifying the incentive constraints, using promised … advanced topics: duality theory and Lagrange multiplier techniques, models with lack of commitment, and martingale methods in …
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Recent empirical studies conclude that small firms have higher but more variable growth rates than large firms. To explore the effect of this size-dependence regularity on moral hazard and investment, we develop a continuous-time agency model with time-varying firm size. Firm size is a diffusion...
Persistent link: https://www.econbiz.de/10012905816
This paper investigates the optimal management of supply disruptions by a manufacturer who uses order inflation and/or investments in process reliability when contracting two risk-averse suppliers. We consider that these investments can be subject to moral hazard. Technically we solve a...
Persistent link: https://www.econbiz.de/10011665554
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Consider a setting in which a principal induces effort from an agent to reduce the arrival rate of a Poisson process of adverse events. The effort is costly to the agent, and unobservable to the principal, unless the principal is monitoring the agent. Monitoring ensures effort but is costly to...
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Using properties of the cdf of a random variable defined as a saddle-type point of a real valued continuous stochastic process, we derive first-order asymptotic properties of tests for stochastic spanning w.r.t. a stochastic dominance relation. First, we define the concept of Markowitz...
Persistent link: https://www.econbiz.de/10011877232
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are illustrated numerically for a variety of utility functions commonly used in decision theory …
Persistent link: https://www.econbiz.de/10014166100