Characterization of a risk sharing contract with one-sided commitment

Yuzhe Zhang ()

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 4, 794-809

Abstract: In this paper I provide a stopping-time-based solution to a long-term contracting problem between a risk-neutral principal and a risk-averse agent. The agent faces a stochastic income stream and cannot commit to the long-term contracting relationship. To compute the optimal contract, I also design an algorithm that is more efficient than value-function iteration.

Keywords: Limited commitment; Risk sharing; Stopping time; Value-function iteration (search for similar items in EconPapers)
JEL-codes: C63 D82 D86 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (12)

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Working Paper: Characterization of a Risk Sharing Contract with One-Sided Commitment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:4:p:794-809

DOI: 10.1016/j.jedc.2012.11.005

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