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Author: Boyan Jovanovic Publisher: ISBN: Category : Contracts Languages : en Pages : 0
Book Description
We analyze a long-term contracting problem involving common uncertainty about a parameter capturing the productivity of the relationship, and featuring a hidden action for the agent. We develop an approach that works for any utility function when the parameter and noise are normally distributed and when the effort and noise affect output additively. We then analytically solve for the optimal contract when the agent has exponential utility. We find that the Pareto frontier shifts out as information about the agent's quality improves. In the standard spot-market setup, by contrast, when the parameter measures the agent's 'quality', the Pareto frontier shifts inwards with better information. Commitment is therefore more valuable when quality is known more precisely. Incentives then are easier to provide because the agent has less room to manipulate the beliefs of the principal. Moreover, in contrast to results under one-period commitment, wage volatility declines as experience accumulates.
Author: Boyan Jovanovic Publisher: ISBN: Category : Contracts Languages : en Pages : 0
Book Description
We analyze a long-term contracting problem involving common uncertainty about a parameter capturing the productivity of the relationship, and featuring a hidden action for the agent. We develop an approach that works for any utility function when the parameter and noise are normally distributed and when the effort and noise affect output additively. We then analytically solve for the optimal contract when the agent has exponential utility. We find that the Pareto frontier shifts out as information about the agent's quality improves. In the standard spot-market setup, by contrast, when the parameter measures the agent's 'quality', the Pareto frontier shifts inwards with better information. Commitment is therefore more valuable when quality is known more precisely. Incentives then are easier to provide because the agent has less room to manipulate the beliefs of the principal. Moreover, in contrast to results under one-period commitment, wage volatility declines as experience accumulates.
Author: Julien Prat Publisher: ISBN: Category : Languages : en Pages : 49
Book Description
We analyze a long-term contracting problem involving common uncertainty about a parameter capturing the productivity of the relationship, and featuring a hidden action for the agent. We develop an approach that works for any utility function when the parameter and noise are normally distributed and when the effort and noise affect output additively. We then analytically solve for the optimal contract when the agent has exponential utility. We find that the Pareto frontier shifts out as information about the agent's quality improves. In the standard spot-market setup, by contrast, when the parameter measures the agent's 'quality', the Pareto frontier shifts inwards with better information. Commitment is therefore more valuable when quality is known more precisely. Incentives then are easier to provide because the agent has less room to manipulate the beliefs of the principal. Moreover, in contrast to results under one-period commitment, wage volatility declines as experience accumulates.
Author: Jakša Cvitanic Publisher: Springer Science & Business Media ISBN: 3642141994 Category : Mathematics Languages : en Pages : 258
Book Description
In recent years there has been a significant increase of interest in continuous-time Principal-Agent models, or contract theory, and their applications. Continuous-time models provide a powerful and elegant framework for solving stochastic optimization problems of finding the optimal contracts between two parties, under various assumptions on the information they have access to, and the effect they have on the underlying "profit/loss" values. This monograph surveys recent results of the theory in a systematic way, using the approach of the so-called Stochastic Maximum Principle, in models driven by Brownian Motion. Optimal contracts are characterized via a system of Forward-Backward Stochastic Differential Equations. In a number of interesting special cases these can be solved explicitly, enabling derivation of many qualitative economic conclusions.
Author: PETER O. CHRISTENSEN; GERALD A. FELTHAM; CHRISTIAN. Publisher: ISBN: 9781638280859 Category : BUSINESS & ECONOMICS Languages : en Pages : 0
Book Description
Timeliness, Accuracy, and Relevance in Dynamic Incentive Contracts examines managerial performance measures from the perspective of timeliness, accuracy, and relevance in multi-period incentive problems. The authors use a simple linear framework where managerial actions do not affect risk and compare and contrast consumption risk for a manager's preferences with single and multiple consumption dates, respectively.Both full commitment to and renegotiation of long-term contracts are considered. Under full commitment, timely and accurate information is usually relevant and desirable; the only differences arise from the modeling of managerial preferences, through the manager's consumption risk. In particular, the timeliness of performance reports can be irrelevant; then, delaying reports is desirable if it can increase their accuracy. Under renegotiation of long-term contracts, the timeliness of information release relative to renegotiation is essential. Any information released prior to renegotiation is incorporated into an ex post efficient (renegotiated) contract and is particularly useful in insuring the manager against future consumption risk. Delayed reporting destroys this insurance value and can make late reports irrelevant, independent of the modeling of managerial preferences. But timely reports can create ex ante inefficient action incentives for managers, and then accuracy can be costly as well.
Author: Michael I.C. Nwogugu Publisher: Springer Nature ISBN: 1137447044 Category : Business & Economics Languages : en Pages : 849
Book Description
Most research about financial stability and sustainable growth focuses on the financial sector and macroeconomics and neglects the real sector, microeconomics and psychology issues. Real-sector and financial-sectors linkages are increasing and are a foundation of economic/social/environmental/urban sustainability, given financial crises, noise, internet, “transition economics”, disintermediation, demographics and inequality around the world. Within complex systems theory framework, this book analyses some multi-sided mechanisms and risk-perception that can have symbiotic relationships with financial stability, systemic risk and/or sustainable growth. Within the context of Regret Minimization, MN-Transferable Utility and WTAL, new theories-of-the-firm are developed that consider sustainable growth, price stability, globalization, financial stability and birth-to-death evolutions of firms. This book introduces new behaviour theories pertaining to real estate and intangibles, which can affect the evolutions of risk-taking and risk perception within organizations and investment entities. The chapters address elements of the dilemma of often divergent risk perceptions of, and risk-taking by corporate executives, regulators and investment managers.
Author: Dirk Bergemann Publisher: World Scientific ISBN: 981437458X Category : Business & Economics Languages : en Pages : 471
Book Description
Foreword by Eric Maskin (Nobel Laureate in Economics, 2007)This volume brings together the collected contributions on the theme of robust mechanism design and robust implementation that Dirk Bergemann and Stephen Morris have been working on for the past decade. The collection is preceded by a comprehensive introductory essay, specifically written for this volume with the aim of providing the readers with an overview of the research agenda pursued in the collected papers.The introduction selectively presents the main results of the papers, and attempts to illustrate many of them in terms of a common and canonical example, namely a single unit auction with interdependent values. It is our hope that the use of this example facilitates the presentation of the results and that it brings the main insights within the context of an important economic mechanism, namely the generalized second price auction.
Author: Yi Li Publisher: Taylor & Francis ISBN: 1000898830 Category : Business & Economics Languages : en Pages : 187
Book Description
Examining the negative consequences that arise from supply chain risks, this book systematically explores firms’ responses to these risks in different situations. In particular, it focuses on sourcing strategies of firms under supply chain risks and the different mitigation tools they use, such as supplier development and multisourcing. Supply chains have expanded extensively because many firms try to take advantage of outsourcing of their raw materials and critical components. Though firms can reap significant benefits due to the widespread use of outsourcing, they have to deal with increasing supply chain risks. In general, supply chain risks are various and may be originated from natural disasters, labor strikes, fires, and so on. These risk incidents can cause serious damage to firms’ profit performance. The analysis and insights from this book can be utilized by firms to alleviate the impact of supply chain risks in the sourcing process. It will also be of interest to researchers and students studying supply chain management.
Author: Jaeyoung Sung Publisher: Springer Nature ISBN: 9819954878 Category : Business & Economics Languages : en Pages : 348
Book Description
This book provides a self-contained introduction to discrete-time and continuous-time models in contracting theory to advanced undergraduate and graduate students in economics and finance and researchers focusing on closed-form solutions and their economic implications. Discrete-time models are introduced to highlight important elements in both economics and mathematics of contracting problems and to serve as a bridge for continuous-time models and their applications. The book serves as a bridge between the currently two almost separate strands of textbooks on discrete- and continuous-time contracting models This book is written in a manner that makes complex mathematical concepts more accessible to economists. However, it would also be an invaluable tool for applied mathematicians who are looking to learn about possible economic applications of various control methods.
Author: Boyan Jovanovic
Author: Boyan Jovanovic
Author: Julien Prat
Author: Jakša Cvitanic
Author: Gaudet, Gérard
Author: PETER O. CHRISTENSEN; GERALD A. FELTHAM; CHRISTIAN.
Author: Carsten Sebastian Pfeil
Author: Michael I.C. Nwogugu
Author: Dirk Bergemann
Author: Yi Li
Author: Jaeyoung Sung