Read Books Online and Download eBooks, EPub, PDF, Mobi, Kindle, Text Full Free.
Optimal Dynamic Contracting
Download Optimal Dynamic Contracting full books in PDF, epub, and Kindle. Read online Optimal Dynamic Contracting ebook anywhere anytime directly on your device. Fast Download speed and no annoying ads. We cannot guarantee that every ebooks is available!
Book Synopsis Optimal Dynamic Contracting by : Marco Battaglini
Download or read book Optimal Dynamic Contracting written by Marco Battaglini and published by . This book was released on 2018 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the conditions under which the “first-order approach” (FO-approach) can be used to characterize profit maximizing contracts in dynamic principal-agent models. The FO-approach works when the resulting FO-contract satisfies a particularly strong form of monotonicity in types, a condition that is satisfied in most of the solved examples used to motivate its use. The main result of our paper is to show that, except for non-generic choices of the stochastic process governing the types' evolution, monotonicity and incentive compatibility are necessarily violated by the FO-optimal contract if the frequency of interactions is sufficiently high (or equivalently if the discount factor, time horizon and type persistence is sufficiently large). This suggests that the applicability of the FO-approach is problematic in environments in which expected continuation values are important relative to per period payoffs. We present conditions under which a class of incentive compatible contracts that can be easily characterized is approximately optimal.
Book Synopsis Essays on Dynamic Contracting by : Ilia Krasikov
Download or read book Essays on Dynamic Contracting written by Ilia Krasikov and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The thesis focuses on understanding the dynamic nature of contracts used in various economic context, specifically financial economics and industrial organization. The first chapter "A Theory of Dynamic Contracting with Financial Constraints'' draws on a large empirical literature documenting that small businesses are financially constrained, and operate at an inefficient level. In the paper, we build a theoretical model where financial constraints arise endogenously as a product of interaction between persistent agency frictions and agent's inability to raise external capital.The paper makes two general points. First, efficiency is a certainty in the long run, and it is achieved through monotone slacking of financial constraints. Second, persistence makes the path towards efficiency much more constrained in comparison to the model with the iid technology. In particular, we show that dynamic agency models with persistence predict a larger cross section of firms in the economy to be financially constrained.At a technical level, we invoke the recursive approach of \citet{aps}, using a two-dimensional vector of promised utilities as a state variable. We show that the optimal contract always stays in a strict subset of the recursive domain termed the shell, and the optimal contract is monotone within this set. We also verify that the results continue to hold in continuous time.The second chapter "Dynamic Contracts with Unequal Discounting'' looks at dynamic screening with soft financial constraints. In contrast to the first paper, the agent can raise money but at a different rate than the principal.We solve for the optimal contract and show that efficiency is not attainable with soft financial constraints. Therefore, the predictions of dynamic models of mechanism design are not robust to the assumption of equal discounting. For the large set of parameters, the optimal contract has the restart property- dynamic distortions are a function of the number of consecutive bad shocks, and once the good shock arrives the process repeats again. We also show that restricting attention to contracts which have the restart property is in general approximately optimal. The endogenous resetting aspect of restart contracts shares features of various contracts used in practice.In the third chapter "On Dynamic Pricing'', we explore dynamic price discrimination, extending a canonical model of monopolistic screening to repeated sales, where a seller uses timing of purchases as a screening instrument. The importance of time as an instrument for price discrimination has been understood since Varian [1989].In the paper, we are aiming to provide a formal analysis of pricing strategies to discriminate amongst consumers based on the timing of information arrival and/or the timing of purchase.A seller repeatedly trades with a buyer. Buyer's valuations for the trade follow a renewal process; that is, they change infrequently at random dates. For the model with two periods, We show that selling the first period good for a spot price and selling the second period good by optioning a sequence of forwards is the optimal pricing strategy. Specifically, at the outset, the seller offers an American option which can be exercised in each of the two periods. Exercising the option grants the buyer with a forward- an obligation to purchase the second period good for a specific price, and a strike price- a right to buy (or not) the good in the second period after learning his value. The buyer with a high valuation exercises the option in the first period, whereas one with a low valuation waits until the second period and then takes a call.We extend the analysis to the general continuous time renewal processes and assess the performance of price discrimination based on American options on forwards:i.optioning forwards is shown to be the deterministic optimum for the sequential screening problem- when the seller makes a sale in a single fixed period;ii.optioning forwards is shown to be the exact optimum for the repeated sales problem in the restricted class of strongly monotone contracts- when allocative distortions are monotone in a whole vector of buyer's valuations;iii.the optimum for the repeated sales problem in the unrestricted class of contracts is shown to be backloaded and a theoretical bound is provided for the fraction of optimal revenue that can be extracted by optioning forwards.Finally, the construction of dynamic pricing mechanism and bounds is ported to study repeated auctions.
Book Synopsis Dynamic Contracting with Unobserved Progress by : Zehao Hu
Download or read book Dynamic Contracting with Unobserved Progress written by Zehao Hu and published by . This book was released on 2015 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates agency problems in projects whereas the principal cannot effectively monitor the progress. In Chapter 2, the baseline model is studied. It is assumed that the success of innovation requires an intermediate breakthrough and a final breakthrough, but the occurrence of the intermediate breakthrough is privately known to the agent. The principal provides incentives to the agent through a termination date and a reward for the final success. Two properties of optimal contracts are identified. First, conditional on the termination date, the optimal contract induces efficient actions from the agent. Second, the reward for success to the agent is in general non-monotone in success time and later success may be rewarded more. In Chapter 3, I consider several modifications to the modeling assumptions and discuss their implications. First, I study the case that the two breakthroughs need not be in a particular order, and the agent can choose which task to work on first. It is shown that it is optimal to induce the agent to work on the more difficult task first. Second, I consider the scenario where there is an ex ante probability that the project is a bad one and breakthroughs never come. The optimal contract is no longer efficient conditional on the termination date. Last, I allow the principal to receive informative signals on whether the intermediate breakthrough has occurred. In Chapter 4, I extend the baseline model by introducing randomly arriving buyers and apply it to study the financing of startup firms with opportunities to be acquired. I show that the potential acquisition increases the cost of providing incentives. Since an agent with low level of progress is "bailed out" when an offer is made to acquire firms with both high and low levels of progress, the agent has more incentive to shirk. In response, the principal reduces the likelihood that the firm with high level of progress is sold. Moreover, the total financing provided by the principal is less compared to the environment without buyers.
Book Synopsis Essays in Dynamic Contracting by : Suehyun Kwon
Download or read book Essays in Dynamic Contracting written by Suehyun Kwon and published by . This book was released on 2012 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines three models of dynamic contracting. The first model is a model of dynamic moral hazard with partially persistent states, and the second model considers relational contracts when the states are partially persistent. The last model studies preference for delegation with learning. In the first chapter, the costly unobservable action of the agent produces a good outcome with some probability, and the probability of the good outcome corresponds to the state. The states are unobservable and follow an irreducible Markov chain with positive persistence. The chapter finds that an informational rent arises in this environment. The second best contract resembles a tenure system: the agent is paid nothing during the probationary period, and once he is paid, the principal never takes his outside option again. The second best contract becomes stationary after the agent is tenured. For discount factors close to one, the principal can approximate his first best payoff with review contracts. The second chapter studies relational contracts with partially persistent states, where the distribution of the state depends on the previous state. When the states are observable, the optimal contracts can be stationary, and the self-enforcement leads to the dynamic enforcement constraint as with i.i.d. states. The chapter then applies the results to study the implications for the markets where the principal and the agent can be matched with new partners. The third chapter studies preference for delegation when there is a possibility of learning before taking an action. The optimal action depends on the unobservable state. After the principal chooses the manager, one of the agents may receive a private signal about the world. The agent decides whether to disclose the signal to the manager, and the manager chooses an action. In an equilibrium, the agents' communication strategies depend on the manager's prior. The principal prefers a manager with some difference in prior belief to a manager with the same prior.
Book Synopsis Dynamic Contracting Under Imperfect Public Information and Asymmetric Beliefs by : Yahel Giat
Download or read book Dynamic Contracting Under Imperfect Public Information and Asymmetric Beliefs written by Yahel Giat and published by . This book was released on 2013 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a dynamic principal-agent model to show how imperfect public information and asymmetric beliefs about payoff-relevant parameters, agency conflicts, and the agent's implicit incentives to influence the principal's posterior beliefs through his unobservable actions interact to affect optimal dynamic contracts. We make a methodological contribution to the literature by solving the continuous-time contracting problem using a discrete-time approximation approach. We obtain a simple characterization of optimal renegotiation-proof contracts in terms of the solution to a nonlinear ordinary differential equation (ODE). We then exploit the properties of the ODE to derive a number of novel implications for the dynamics of long-term contracts that alter the intuition gleaned from previous literature. Optimism has a first-order impact on incentives, investment and output that could reconcile the "private equity" puzzle. Consistent with empirical evidence, the interaction between asymmetric beliefs, risk-sharing and adverse selection costs could cause the time-paths of the agent's incentive intensities to be increasing or decreasing. Our results also suggest that the incorporation of imperfect public information and asymmetric beliefs could potentially reconcile empirical evidence of an ambiguous relation between risk and incentives, and a non-monotonic relation between firm value and incentives. Permanent and transitory components of risk have differing effects on incentives, which suggest that empirical investigations of the link between risk and incentives should appropriately account for different components of risk.
Book Synopsis Dynamic Contracting, Persistent Shocks and Optimal Taxation by :
Download or read book Dynamic Contracting, Persistent Shocks and Optimal Taxation written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper I develop continuous-time methods for solving dynamic principal-agent problems in which the agent's privately observed productivity shocks are persistent over time. I characterize the optimal contract as the solution to a system of ordinary differential equations, and show that, under this contract, the agent's utility converges to its lower bound--immiseration occurs. I also show that, unlike in environments with i.i.d. shocks, the principal would like to renegotiate with the agent when the agent's productivity is low--it is not renegotiation-proof. I apply the theoretical methods I have developed and numerically solve this (Mirrleesian) dynamic taxation model. I find that it is optimal to allow a wedge between the marginal rate of transformation and individuals' marginal rate of substitution between consumption and leisure. This wedge is significantly higher than what is found in the i.i.d. case. Thus, using the i.i.d. assumption is not a good approximation quantitatively when there is persistence in productivity shocks.
Book Synopsis Research Handbook on Inventory Management by : Jing-Sheng J. Song
Download or read book Research Handbook on Inventory Management written by Jing-Sheng J. Song and published by Edward Elgar Publishing. This book was released on 2023-08-14 with total page 565 pages. Available in PDF, EPUB and Kindle. Book excerpt: This comprehensive Handbook provides an overview of state-of-the-art research on quantitative models for inventory management. Despite over half a century’s progress, inventory management remains a challenge, as evidenced by the recent Covid-19 pandemic. With an expanse of world-renowned inventory scholars from major international research universities, this Handbook explores key areas including mathematical modelling, the interplay of inventory decisions and other business decisions and the unique challenges posed to multiple industries.
Book Synopsis Optimal Dynamic Contracts and Pollution by : Jerome Detemple
Download or read book Optimal Dynamic Contracts and Pollution written by Jerome Detemple and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine optimal dynamic contracts when the firm's production generates harmful pollution undermining its productivity. The optimal contract rewards for financial performance and penalizes pollution. The combination of both contract sensitivities incentivizes the agent's effort and environmental (pollution abating) investment. When the accumulated pollution exceeds a threshold, the contract sensitivity to financial performance drops, its sensitivity to pollution emerges, and environmental investment increases with pollution. In an economy with a continuum of polluting firms, contracting on firm pollution improves the welfare of the principal and the agent. Calibrating the model to the U.S. economy, we show that the aggregated pollution is reduced by 38.4% if all firms contract on their own pollution.
Book Synopsis Contracting Over Actions by : Alexander Philip Frankel
Download or read book Contracting Over Actions written by Alexander Philip Frankel and published by Stanford University. This book was released on 2011 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt: I consider models in which contracts are written over the verifiable actions taken by an agent in multiple decisions. The principal's preferences over actions depend on underlying states of the world, but only the agent observes the states. The principal cannot audit the agent's information or punish her ex post for having taken inappropriate actions. Moreover, the principal is uncertain about the agent's preferences conditional on the states. Chapter 2 extends the concept of a quota contract to account for discounting and for the possibility of infinitely many periods: a discounted quota fixes the number of expected discounted plays on each action. Discounted quotas are optimal contract forms, even if arbitrary dynamic transfer payments are available, if the agent is assumed to have state-independent preferences. I recursively characterize the optimal discounted quotas for an infinitely repeated problem with independent and identically distributed states. Then I give a more explicit description of these contracts in the limit as interactions become frequent, and when only two actions are available. In Chapter 3 I allow the agent's preferences to depend on the states of the world. Under a variety of assumptions on the timing of the game and on the set of possible agent utility functions, I solve for the max-min optimal mechanisms -- those which maximize the principal's payoff against the worst possible agent preference type. These mechanisms are characterized by a property which I call "aligned delegation." Max-min optimal mechanisms may take the simple forms of simultaneous ranking mechanisms, sequential quotas, or budgets.
Book Synopsis Handbook of Macroeconomics by : John B. Taylor
Download or read book Handbook of Macroeconomics written by John B. Taylor and published by Elsevier. This book was released on 2016-11-12 with total page 3009 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of Macroeconomics Volumes 2A and 2B surveys major advances in macroeconomic scholarship since the publication of Volume 1 (1999), carefully distinguishing between empirical, theoretical, methodological, and policy issues, including fiscal, monetary, and regulatory policies to deal with crises, unemployment, and economic growth. As this volume shows, macroeconomics has undergone a profound change since the publication of the last volume, due in no small part to the questions thrust into the spotlight by the worldwide financial crisis of 2008. With contributions from the world's leading macroeconomists, its reevaluation of macroeconomic scholarship and assessment of its future constitute an investment worth making. - Serves a double role as a textbook for macroeconomics courses and as a gateway for students to the latest research - Acts as a one-of-a-kind resource as no major collections of macroeconomic essays have been published in the last decade - Builds upon Volume 1 by using its section headings to illustrate just how far macroeconomic thought has evolved
Book Synopsis Dynamic Contracting by : Agostino Capponi
Download or read book Dynamic Contracting written by Agostino Capponi and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a dynamic multitask principal-agent model in which the agent allocates his resources on two tasks of different types: effort and accident prevention. We explicitly characterize the optimal contract as well as optimal effort and prevention actions applied by the agent. In contrast to the linear incentive scheme for effort, accident prevention leads to a log-linear punishment scheme if the agent is risk averse, becoming linear only if the agent is risk neutral. Both the sublinearity of the contract and the allocation of resources on the two tasks crucially depend on the risk aversion of the agent. Accident prevention ties up some of the agent's capacity and induces him to substitute resources away from effort to prevention.
Book Synopsis Scale Effects in Dynamic Contracting by : Santiago Moreno-Bromberg
Download or read book Scale Effects in Dynamic Contracting written by Santiago Moreno-Bromberg and published by . This book was released on 2017 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a continuous-time contracting problem in which size plays a role. The agent may take on excessive risk to enhance short-term gains; doing so exposes the principal to large, infrequent losses. The optimal contract includes size as an instrument: downsizing along the equilibrium path may be necessary so as to preserve incentive compatibility. We characterize the principal's value function and the downsizing process, both of which depend on the nature of the liquidation value. When the latter has fixed and size-dependent components, there is an optimal (endogenous) liquidation size. In the special case where the liquidation value is linear in size, one may describe the solution in size-adjusted terms, which allows for the study of re-investment. The optimal contract is implemented using the full array of financial securities plus debt covenants; holding equity is essential to curb risk taking. Conflicts emerge between classes of security holders and explain phenomena like seniority of claims. Firms for which risk taking is less attractive can afford a higher leverage.
Book Synopsis Essays in Dynamic Contract Theory by : Rui Zhao
Download or read book Essays in Dynamic Contract Theory written by Rui Zhao and published by . This book was released on 2001 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Optimality and Renegotiation in Dynamic Contracting by : Marco Battaglini
Download or read book Optimality and Renegotiation in Dynamic Contracting written by Marco Battaglini and published by . This book was released on 2005 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :Econometric Society. World Congress Publisher :Cambridge University Press ISBN 13 :1107016045 Total Pages :511 pages Book Rating :4.1/5 (7 download)
Book Synopsis Advances in Economics and Econometrics by : Econometric Society. World Congress
Download or read book Advances in Economics and Econometrics written by Econometric Society. World Congress and published by Cambridge University Press. This book was released on 2013-05-27 with total page 511 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first volume of edited papers from the Tenth World Congress of the Econometric Society 2010.
Book Synopsis Web and Internet Economics by : Michal Feldman
Download or read book Web and Internet Economics written by Michal Feldman and published by Springer Nature. This book was released on 2022-01-20 with total page 563 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book constitutes the refereed proceedings of the 17th International Conference on Web and Internet Economics, WINE 2021, which was held online during December 14-17, 2021. The conference was originally planned to take place in Potsdam, Germany, but changed to a virtual event due to the COVID-19 pandemic. The 41 full papers presented in this volume were carefully reviewed and selected from 146 submissions. They were organized in topical sections as follows: mechanism design and pricing; matching, markets and equilibria; learning, fairness, privacy and behavioral models; social choice and cryptocurrencies.
Book Synopsis Sticky Incentives and Dynamic Agency by : John Yiran Zhu
Download or read book Sticky Incentives and Dynamic Agency written by John Yiran Zhu and published by . This book was released on 2011 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: I explicitly derive the optimal dynamic incentive contract in a general continuous time agency problem where inducing static first-best action is not always optimal. My framework generates two dynamic contracts new to the literature: (1) a q̀̀uiet-life" arrangement and (2) a suspension-based endogenously renegotiating contract. Both contractual forms induce a mixture of first-best and non-first-best action. These contracts capture common features in many real life arrangements such as ù̀p-or-out", partnership, tenure, hidden compensation and suspension clauses. In applications, I explore the effects of taxes, bargaining and renegotiation on optimal contracting. My technical work produces a new type of incentive scheme I call sticky incentives which underlies the optimal, infrequent-monitoring approach to inducing a mixture of first-best and non-first-best action. Furthermore, I show how differences in patience between the principal and agent factor into optimal contracting.
