The role of boundary solutions in principal-agent problems of the Holmstrom-Milgrom type

• 成果类型: Article
• 署名作者: Hellwig, Martin F.
• 署名单位: Max Planck Society
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2006.09.004
• 发表日期: 2007
• 页码: 446-475
• 关键词: principal-agent problems; linear incentive schemes; intertemporal incentives; Brownian Motion

摘要

The paper extends the Holmstrom-Milgrom [B. Holmstrom, P. Milgrom, Aggregation and linearity in the provision of intertemporal incentives, Econometrica 55 (1987) 303-328] analysis of intertemporal incentive provision to allow for the implementation of actions on the boundary of the feasible set. Boundary actions provide the principal with some freedom in choosing incentive schemes. This can be used to reduce premia. The paper characterizes optimal incentive schemes for the continuous-time Brownian-motion model and F its discrete-time approximations. Linearity of incentive schemes in accounts is confirmed. However, for models with effort costs depending only on mean returns, the availability of boundary actions destroys the linearity of optimal incentive schemes in profits. (C) 2006 Elsevier Inc. All rights reserved.