Characterization of a Risk Sharing Contract with One-Sided Commitment

Yuzhe Zhang (zhangeager@gmail.com)

MPRA Paper from University Library of Munich, Germany

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 D86 (search for similar items in EconPapers)
Date: 2012-11, Revised 2012-08
New Economics Papers: this item is included in nep-cta, nep-dge and nep-mic
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Related works:
Journal Article: Characterization of a risk sharing contract with one-sided commitment (2013)
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