Stairway to heaven or highway to hell: Liquidity, sweat equity, and the uncertain path to ownership

• 成果类型: Article
• 署名作者: Krishna, R. Vijay; Lopomo, Giuseppe; Taylor, Curtis R.
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; Duke University
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12013
• 发表日期: 2013
• 页码: 104-127
• 关键词: Principal-agent problem; continuous-time; security design; moral hazard; INFORMATION; INVESTMENT; CONTRACTS; DYNAMICS; taxation

摘要

We study a setting in which a principal contracts with an agent to operate a firm over an infinite time horizon when the agent is liquidity constrained and privately observes the sequence of cost realizations. We formulate the principal's problem as a dynamic program in which the state variable is the agent's continuation utility, which is naturally interpreted as his equity in the firm. The optimal incentive scheme resembles what is commonly regarded as a sweat equity contract, with all rents back loaded. Payments begin when the agent effectively becomes the owner, and from this point on, all production is efficient. These features are shown to be similar to features common in real-world work-to-own franchising agreements and venture capital contracts.