Author: Ian D. JewittPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Justifying the First-order Approach to Principal Agent Problems
Author: Ian D. JewittThe First-order Approach to Principal-agent Problems
Author: Stanford University. Institute for Mathematical Studies in the Social SciencesPublisher:
ISBN:
Category :
Languages : en
Pages : 27
Book Description
Justifying the First Order Approach to Principal Agent Problems
Author: Ian JewittFirst-Order Approach to Principal-Agent Problems
Author: Eskander AlviPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
The First-Order Approach (FOA) to principal agent problems is very convenient and mathematically tractable. However, existing results show that the FOA is valid only for additively separable utility functions. This is somewhat limiting. In this paper sufficient conditions are identified that extend the validity of the FOA to nonseparable cases. The additional conditions involve restrictions on the agent's preferences, particularly interactions between action and the wage contract. These conditions imply that leisure is normal and the agent's absolute risk aversion increases with action. Comparative static results regarding the wage contract and its gradient are also discussed.
The first-order approach to principal-agent problems
Author: William P. RogersonThe First-order Approach to Multi-task Principal-agent Problems
Author: Bernard Sinclair-DesgagnéPublisher:
ISBN:
Category : First-order logic
Languages : en
Pages : 10
Book Description
The Mathematics of Principal-agent Problems
Author: Bibo LiuPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
The principal-agent problem is an important model in the field of Economics of Information. In this thesis we study only a particular type of principal-agent problem which is called moral hazard model and by the principal-agent problem we mean it is moral hazard model. The moral hazard model actually belongs to the class of bilevel programming problems in Mathematics. In Economics. the first order approach is used to reduce the principal-agent problem to a single level optimization problem. However, this approach is only valid under some strong conditions. Moreover the approach can only be used under the assumption that the optimal action of the principal-agent problem and its relaxed problem appears only at an interior point. In this thesis, we consider a new relaxed problem. Under more general assumptions. we can solve the principal-agent problem without restricting the optimal action of the agent to be in the interior.
The Mathematics of Principal-agent Problems
Author: Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
The principal-agent problem is an important model in the field of Economics of Information. In this thesis we study only a particular type of principal-agent problem which is called moral hazard model and by the principal-agent problem we mean it is moral hazard model. The moral hazard model actually belongs to the class of bilevel programming problems in Mathematics. In Economics. the first order approach is used to reduce the principal-agent problem to a single level optimization problem. However, this approach is only valid under some strong conditions. Moreover the approach can only be used under the assumption that the optimal action of the principal-agent problem and its relaxed problem appears only at an interior point. In this thesis, we consider a new relaxed problem. Under more general assumptions. we can solve the principal-agent problem without restricting the optimal action of the agent to be in the interior.
On the Generalized Principal-Agent Problem
Author: Peter S. FaynzilbergPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This paper addresses the class of generalized agency problems: situations in which adverse selection and moral hazard are jointly present. The complexity of the problem is increased by the interactions between the incentives associated with both types of private information. We present a decomposition of the principal's optimization problem under the first-order approach that sheds light on these interactions and significantly improves tractability. As applications, we (1) provide examples of the closed form solutions of the optimal contract, and (2) utilize the decomposition in the analysis of existence of the optimal contract. We identify a set of conditions that largely rely on economically appealing properties of production technology and ensure existence of the optimal contract. We also investigate the validity of the first-order approach in the generalized agency problem. We show that (1) the first-order approach is valid if the production technology satisfies the linear distribution function condition (LDFC) in actions and types, and (2) for more general production technologies the Mirrlees-Rogerson sufficient conditions need to be extended to include restrictions on aspects of the (endogenous) optimal contract itself.
Author: Murray Brown