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Dynamic Incentive Contracts with Controllable Risk

Yang, Zhaojun; Zhang, Yuqian - 2023

We develop a continuous-time dynamic contracting model where a risk-neutral principal hires a risk-averse agent to … a value-destroying effect of risk. No-saving selection can be exogenous or endogenous. We show that contract efficiency … advantage over the case where principals control the risk. The contract efficiency under project risk controlled by the agent …

Persistent link: https://www.econbiz.de/10014354348

Optimal sequential delegation

Kovác, Eugen; Krähmer, Daniel - 2013

The paper extends the optimal delegation framework pioneered by Holmström (1977, 1984) to a dynamic environment where, at the outset, the agent privately knows his ability to interpret decision relevant private information received later on. We show that any mechanism can be implemented by a...

Persistent link: https://www.econbiz.de/10010198973

Dynamic managerial compensation : on the optimality of seniority-based schemes

Garrett, Daniel F.; Pavan, Alessandro - 2014

We study the optimal dynamics of incentives for a manager whose ability to generate cash .ows changes stochastically with time and is his private information. We show that, in general, the power of incentives (or "pay for performance") may either increase or decrease with tenure. However, risk...

Persistent link: https://www.econbiz.de/10010476876

Contracting with researchers

Verbeck, Matthias; Schulte, Elisabeth - 2016

We study a setting in which one or two agents conduct research on behalf of a principal. The agents' success depends on effort and the choice of a research technology that is uncertain with respect to its quality. A single agent has no incentive to deviate from the principal's preferred...

Persistent link: https://www.econbiz.de/10011450575

Relational incentive contracts with persistent private information

Malcomson, James M. - 2015 - This version: July 24, 2015

This paper investigates relational incentive contracts with continuous, privately-observed agent types that are persistent over time. With fixed agent types, full separation is not possible when continuation equilibrium payoffs following revelation are on the Pareto frontier of attainable...

Persistent link: https://www.econbiz.de/10011300994

Insurance and information : firms as a commitment device

Bovenberg, Ary Lans; Teulings, Coen N. - 2001

shirking models, we explain why different contracting modes coexist in quitehomogeneous industries. …

Persistent link: https://www.econbiz.de/10011316894

Dynamic contracting with long-term consequences : optimal CEO compensation and turnover

Vasama, Suvi - 2016

We examine optimal managerial compensation and turnover policy in a principal-agent model in which the firm output is serially correlated over time. The model captures a learning-by-doing feature: higher effort by the manager increases the quality of the match between the firm and the manager in...

Persistent link: https://www.econbiz.de/10011550469

Moral Hazard and Bargaining Over Incentive Contracts

Dittrich, Marcus - 2014

This paper analyses bargaining over an incentive compatible contract in a moral hazard framework. We introduce the … bargaining power, the contract in the Kalai-Smorodinsky solution yields a more efficient outcome and induces more effort. The …

Persistent link: https://www.econbiz.de/10013048890

Relational Incentive Contracts with Persistent Private Information

Malcomson, James M. - 2015

Persistent link: https://www.econbiz.de/10013018191

Moral Hazard with Limited Liability : Random-Variable Formulation and Optimal Contract Structures

Wang, Wenbin - 2019

This paper studies the optimal contract for a risk-neutral agency with limited liability. We introduce a novel … formulation of the model, in which the contract design problem reduces to a problem of constructing the distribution function of a … effort and minimizing the cost of the agent's compensation. We show that the optimal contract may involve one or two tiers of …

Persistent link: https://www.econbiz.de/10012905793