Existence of Optimal Contracts for Principal-Agent Problem with Drift Control and Quadratic Effort Cost

Xinfu Chen, Shuaijie Qian and Guan Qiao

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Abstract: The existence of optimal contracts of the principal-agent problem is a long-standing problem. According to the general framework in Cvitani\'c et al. [2], this existence can be derived from the existence of a classical solution to a degenerated fully nonlinear parabolic partial differential equation problem. In this work we consider the simple case with drift control and quadratic cost function, then prove the existence of classical solution to that PDE.

Date: 2025-03, Revised 2025-03
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