Common agency dilemma with information asymmetry in continuous time
Mastrolia, Thibaut; Ren, Zhenjie (2017), Common agency dilemma with information asymmetry in continuous time. https://basepub.dauphine.fr/handle/123456789/17191
TypeDocument de travail / Working paper
External document linkhttps://hal.archives-ouvertes.fr/hal-01534611
Series titleCahier de recherche CEREMADE, Université Paris-Dauphine
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Abstract (EN)In this paper, we consider a problem of contract theory in which several Principals hire a common Agent and we study the model in the continuous time setting. We show that optimal contracts should satisfy some equilibrium conditions and we reduce the optimisation problem of the Principals to a system of coupled Hamilton-Jacobi-Bellman (HJB) equations. Further, in a more specific linear-quadratic model where two interacting Principals hire one common Agent, we are able to calculate the optimal effort by the Agent for both Principals. In this continuous time model, we extend the result of Bernheim and Whinston (1986) in which the authors compare the optimal effort of the Agent in a non-cooperative Principals model and that in the aggregate model, and give the condition under which these two optimisations coincide.
Subjects / KeywordsMoral hazard models; common agency; system of HJB equations; BSDEs
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