Incentives and Performance with Optimal Money Management Contracts

• 成果类型: Article
• 署名作者: Pegoraro, Stefano
• 署名单位: University of Notre Dame
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/724576
• 发表日期: 2023
• 页码: 2920-2968
• 关键词: Moral hazard; AGENCY; COMPENSATION

摘要

I characterize the dynamics of incentives in an optimal contract with investment delegation, moral hazard, and uncertainty about the agent's productivity. The principal increases the agent's incentives after good performance in order to delegate more capital to an agent with higher perceived productivity, thus implementing a convex pay-for-performance scheme. Moreover, the principal commits to reduce the agent's future incentives in order to mitigate ex ante investment distortions. Methodologically, I provide a duality-based strategy to overcome technical challenges common to continuous-time contracting models with state variables. I also derive a sufficient condition to verify the validity of the first-order approach.