Optimal contracts under competition when uncertainty from adverse selection and moral hazard are present

Natalie Packham

No 2018-033, IRTG 1792 Discussion Papers from Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series"

Abstract: In a continuous-time setting where a risk-averse agent controls the drift of an output process driven by a Brownian motion, optimal contracts are linear in the terminal output; this result is well-known in a setting with moral hazard and under stronger assumptions adverse selection. We show that this result continues to hold when in addition reser- vation utilities are type-dependent. This type of problem occurs in the study of optimal compensation problems involving competing principals.

Keywords: Principal-agent modelling; contract design; stochastic process; stochastic control (search for similar items in EconPapers)
JEL-codes: C00 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:irtgdp:2018033

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