The Principal-Agent Problem With Time Inconsistent Utility Functions

Boualem Djehiche and Peter Helgesson

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Abstract: In this paper we study a generalization of the continuous time Principal-Agent problem allowing for time inconsistent utility functions, for instance of mean-variance type. Using recent results on the Pontryagin maximum principle for FBSDEs we suggest a method of characterizing optimal contracts for such models. To illustrate this we consider a fully solved explicit example in the linear quadratic setting.

Date: 2015-03
New Economics Papers: this item is included in nep-cta, nep-mic and nep-upt
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Citations: View citations in EconPapers (5)

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