Sequential optimal contracting in continuous time

Guillermo Alonso Alvarez; Erhan Bayraktar; Ibrahim Ekren; Liwei Huang

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arXiv · 2411.04262

Sequential optimal contracting in continuous time

Guillermo Alonso Alvarez·Erhan Bayraktar·Ibrahim Ekren·Liwei Huang

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Abstract

In this paper we study a principal-agent problem in continuous time with multiple lump-sum payments (contracts) paid at different deterministic times. We reduce the non-zero sum Stackelberg game between the principal and agent to a standard stochastic optimal control problem. We apply our result to a benchmark model for which we investigate how different inputs (payment frequencies, payments' distribution, discounting factors, agent's reservation utility) affect the principal's value and agent's optimal compensations.

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BibTeX RIS

Guillermo Alonso Alvarez, Erhan Bayraktar, Ibrahim Ekren, Liwei Huang. 2024-11-06. Sequential optimal contracting in continuous time. https://arxiv.org/abs/2411.04262

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